WeWork Exits 3 DC Locations in Turnaround Move
- Oct 16, 2020
WeWork is trimming its portfolio by closing three locations in Washington, D.C., this month as the $2.9 billion coworking giant continues to review its real estate footprint in pursuit of profitability. The closures will leave the company with 16 flexible office venues in the nation’s capital.
Manhattan-based WeWork confirmed the plans to Commercial Property Executive after they were first reported by Bisnow and Popville. “In streamlining our portfolio towards profitable growth, we have decided to move on” from the locations, a spokesperson said in a statement, adding that the company has numerous “excellent” WeWork locations in the immediate area.
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The three centers are all located in buildings owned by Douglas Development Corp. and include Manhattan Laundry at 1342 Florida Ave. NW; Wonder Bread Factory at 641 S. St. NW; and 718 7th St. NW. WeWork’s official move-out date for these properties is October 31, CPE has learned. The company’s website now lists 18 locations in the District of Columbia, including two of the soon-to-be-shuttered sites.
Although the transition to work-from-home arrangements due to the pandemic has strained the coworking sector, WeWork’s downsizing in D.C. appears to stem from a five-year turnaround plan that the company announced last November rather than this more recent crisis. The strategy, which the company rolled out after shelving plans for an initial public offering, called for rightsizing the business and achieving profitability through measured growth.
Marcelo Claure, WeWork’s executive chairman, said at the time that the company would continue leasing space in its top 12 markets but would consider signing management agreements with landlords rather than long-term leases in other cities. The company laid off thousands of employees in November and reportedly followed up with further job cuts this year.
Weathering the storm
Since then, WeWork has managed to reduce its free cash outflow to $671 million in the second quarter of 2020, from $1.3 billion in the fourth quarter of last year, Bloomberg reported, citing a memo from Japanese investor SoftBank Group Corp. SoftBank, which has invested a total of more than $10 billion in WeWork, made a fresh commitment of $1.1 billion in August.
The memo also revealed that the company’s second-quarter revenue rose 9 percent year-over-year to $882 million, declining from its first-quarter level of $1.1 billion. WeWork’s membership base shrank to 612,000 in the second quarter, down 12 percent compared to the first three months of the year. Despite the challenges, Claure told the Financial Times in July that the company was on track to have positive cash flow and profits by 2021.
WeWork’s website indicates that it has 806 locations open or coming soon in 121 cities globally. At the start of October, WeWork announced the launch of a new platform called Business Solutions that will provide members with access to various human resources services as part of a plan to move beyond its core office space business.
In a vote of confidence for the sector, rival flexible office provider Industrious recently announced it would occupy more than 52,000 square feet at Chicago’s iconic Willis Tower, boosting the company’s portfolio of more than 100 locations.