WeWork's building at 424 Fifth Ave., the former Lord & Taylor flagship location
NEW YORK CITY—WeWork, recently rebranded as the We Company, cut 300 employees last week. That put a spotlight of media attention not only on the pink slips but on what's happening behind the scenes at the co-working and flexible office space provider. A company spokesperson shared the following statement with GlobeSt.com regarding the terminations:
“Over the past nine years, WeWork has grown into one of the largest global physical networks thanks to the hard work and dedication of our team. WeWork recently conducted a standard annual performance review process. Our global workforce is now more than 10,000 strong, and we remain committed to continuing to grow and scale in 2019, including hiring an additional 6,000 employees.”
TechCrunch had reported that the terminations affected the engineering team, and product and user experience design departments. The terminations amounted to about 3% of its staff.
The last time a substantial number of employees were let go was in 2016, when WeWork cut about 7% of its workers.
The company was last valued at $47 billion. That was after SoftBank Group scaled back its investments in the office space provider from $16 billion to $6 billion.
Since last summer, WeWork has been hit with news articles including the Wall Street Journal, The New York Times, Recode and Quartz (formerly owned by Atlantic Media but sold to the Japanese media company Uzabase) reporting it is operating at big losses. On January 7, 2019, The New York Times wrote, “WeWork continues to spend far more than it makes. It reported a loss of $723 million for the first half of last year as it built new co-working spaces around the globe.”
An Aug. 10, Inc. magazine article titled “WeWork Is Burning Through Cash to Grow. Here's Why That's Good for Entrepreneurs” quoted a Wall Street Journal source stating WeWork was investing heavily in its enterprise clients.
Some investors take the position that a company has to spend, investing in businesses, to grow. And it has been a juggernaut in its non-stop flurry of growth: Last year, WeWork became Manhattan's largest occupier of office space. It recently closed on its acquisition of the Lord & Taylor Fifth Ave. building. It announced plans to open in South Africa. It launched membership-free co-working space and retail operations Made by We. Just days ago, it leased over 200,000 square feet at One Seaport Plaza.
The company continues to aggressively move forward with HQ by WeWork which focuses on mid-sized offices. A source close to the company tells GlobeSt.com it's on track to opening 30 offices for this program in New York City and San Francisco by the end of this month, and in January HQ by WeWork reached dedicated space of one million square feet in those cities alone.
Spending far more than what it's generating in revenue may pay off in the future but it involves risks. According to David Gelles' January 7 article in The New York Times, this has “led many analysts to believe that WeWork is wildly overvalued.”
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Betsy Kim
Betsy Kim was the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.
