"We are done with WeWork, at least for the moment," Piedmont Office Realty Trust Executive Vice President Joseph Pangburn said.
Pangburn, who has leased three properties to WeWork in Atlanta, Washington, D.C., and Orlando, Florida, is among the many reassessing the value of WeWork, and coworking in general, in the wake of WeWork's IPO prospectus released earlier this month.
WeWork, the leader in the globalization of coworking, revealed in the prospectus that it lost nearly $700M in the first half of 2019, and said it will likely lose more money “in the foreseeable future.”
The company, however, is valued at $47B. That discrepancy has many in the office market scratching their heads, and some stepping back from the company or the entire industry.
“Coworking isn’t broken. WeWork is broken,” The Cannon founder and CEO Lawson Gow said during Bisnow’s Houston State of Office at The Hub in Greenway Plaza Wednesday.
Pangburn said though Piedmont is pausing its activity with WeWork for now, it is still considering other coworking companies.
But some are generalizing those concerns out to the rest of the industry.
Lenders are concerned about the state of coworking, Hicks Ventures principal Patrick Hicks said. They have lowered the amount of coworking they consider healthy for an office building.
A year ago, a lender may have financed a project that was up to 70% occupied by a coworking operator, he said. After the poor finances revealed by WeWork, the percentage may be as low as 10% of the office building.
“When the debt market starts to tell you they are worried and skittish on [coworking], there is probably a bubble,” Hicks said. Houston has been slow to embrace coworking compared to other major cities. While WeWork is the largest tenant in Manhattan, the brand has only four relatively small locations in Houston. Coworking comprises a small percentage of the overall Houston market.
The survival of coworking isn't dependent on the success of WeWork, but on the reimagining of what coworking is, who can participate and how it is financed, panelists said.
“Could WeWork have done a few things differently? Sure,” CommonGrounds CEO Jacob Bates said. “But to say coworking or flexible workspace is going to go away, even if WeWork’s IPO is unsuccessful, is a complete misnomer.”