WeWork Says It is at Risk for Bankruptcy. Has Co-Working Died?

WeWork has warned that it is at risk of bankruptcy after posting a net loss of nearly $700 million in the first six months of this year and recording $10.7 billion in net losses over the previous three years. The company has become a cautionary tale on how not to nurture an emerging business model, but its falling fortunes do beg the question of whether co-working can survive in a post-pandemic world. After all, one argument the company has been making since 2020 is that the emergence of remote and hybrid work would strengthen its business model as more people sought to escape their home offices and as companies took advantage of WeWork’s flexibility to avoid signing long-term leases.  

For WeWork that hasn’t been the case: it reported that more customers than anticipated had left while fewer new members joined, causing its occupancy rate to drop in the second quarter.  

But before we sign off on co-working’s demise, let’s look at the fortunes of another company that has also reported its half year results, albeit with far better numbers.

Coworking, hybrid, and collaborative working space provider IWG saw a big jump in January through June performance for 2023. With more than 4,000 work locations in more than 120 countries, revenue was up 14% year over year and operating profit increased by 154%.

CEO Mark Dixon was clear that in his mind, the driving force has been hybrid work.

“We continue to grow as expected, producing a record period for IWG with our highest ever revenue in our over 30-year history, up 14% from the first half of 2022,” he said in a prepared statement. “Importantly, we have achieved this alongside increasing EBITDA and cashflow generation, which is reducing net debt. We have done this through a combination of higher demand for flexible work products, improved pricing and cost discipline and I am looking forward to continuing this momentum into the second half of 2023 and into 2024.”

More informally during an earnings call, he characterized 2023 as “a truly fascinating time for the hybrid working industry.”

According to a Pew Research study early in 2023, 41% of workers with jobs that could be done remotely were on a hybrid schedule. That was up from 35% at the same time in 2022.

An analyst asked about large corporate use of the approach. “So, in terms of the sort of large company percentage, it’s growing all the time,” Dixon said. “And so, what we’ve got is companies we already have that are just putting more people onto hybrid. And we’re getting a lot of new companies coming in, who are adopting hybrid for the first time. And they … will start small with one country and then they add more. So, it’s becoming a bigger proportion. It’s well over 50% now and will continue to grow.”

The question likely came because of increased questions over the long-term viability of hybrid work and the desire many corporations have shown to bring people back into the office. Executives have frequently questioned whether hybrid work undermines corporate culture, innovation, and training.

Andrea Pirrotti-Dranchak, global enterprise director of NewFlex, which operates flex office spaces on behalf of landlords, tells GlobeSt.com that fully remote work for everyone isn’t effective. “Employees seek a sense of connect and belonging,” she says.  “The isolation is literally painful for employees – psychologically and mentally.  Commanding individuals to return to the office also does not work. Employees have tasted freedom to choose where, when and how to work. And companies that take away that freedom will see their employees walk right out the door – even in a turbulent economy.”

Dixon would seem to agree, given his remarks on the earnings call: “The narrative hasn’t yet caught up with reality, and reality is large corporations globally are moving to a much more flexible approach to how they support their people. They’re moving towards hybrid working, and it’s universal and it’s gathering pace.”

The shift, though, can be rocky at points. “Working for a company that actually designs and manufactures home office furniture gave us the unique benefit of helping our own employees transition to home offices with effective furniture solutions when the pandemic hit,” says Dave Adams, vice president of BDI Furniture, which makes furniture for home office spaces and entertainment. “However, like most companies, we still had to sort out how this would work from a productivity and communications perspective. For our employees — even myself — it took a while to sort out what a WFH or even hybrid solution means in terms of personal and work time, even post-pandemic.”

Unfortunately for WeWork at least, these realizations may be coming too late.