Navigating WeWork’s Bankruptcy: Unraveling the Warning Signs and the Future of Serviced Offices

Photo by Annie Spratt

The recent bankruptcy filing by WeWork has sent shockwaves through the business world, prompting a closer examination of the underlying issues within their business model. Mark Knops, Founder and CEO of Sketch Labs, takes a look at the challenges WeWork faced.

The news of WeWork filing for bankruptcy has been a shock – however, if you take a closer look at their model the warning signs were always there.

Over the last few years, their attempt to build a business which included the ownership of massive buildings which serviced their freelance/agile digital nomads was always going to hit choppy waters, especially in the last year and a half when interest rate rises started to hit the market following a pandemic which saw the business massively restructure.

Even though the business was once valued at $43bn, it seemed strange that more hadn’t been made of the rate rises and how this could affect their repayments for the properties they were buying/leasing. The truth now seems to be coming out that this was partially responsible for their collapse with missed interest payments in October.

The irony is that more employers are turning to hybrid models and flexible office spaces are becoming not just the trend but the preferred method to operate.

However, WeWork is just one business. Competitors in this space don’t have the same model or have the same world network that WeWork aggressively sought to create. The debt alone from the losses over the last few years is beyond eye-watering.

So, Can WeWork Recover?

It’s too soon to tell. Undoubtedly they leave behind a legacy of large serviced offices around the world but the working environment is changing. The more businesses start to implement better hybrid working practices the more opportunities it has to come back.

It would need to rebrand and work on reducing its overall costs and think more clearly about what is needed for the new working models as we are seeing dramatic changes on a near-weekly basis in the serviced office sector.

We are frequently asked what implications this might have on the serviced office sector. And to be honest, the serviced office sector isn’t going anywhere, if anything, independent players and organisations with enough acumen and experience, can make this work very well. We expect to see more independent-led providers who can put the essentials into the mix whilst also being able to cater for more high-end requirements, including special features such as cinema rooms, entertainment spots and state-of-the-art meeting rooms which personalise and develop each tenant’s needs.

So what about the future of the sector?

Serviced offices are intrinsically tied to the hybrid model and the agile digital service sector economy. With that said, it’s clear that the hybrid model is growing. Data from Cisco, OKTA and Edelmen Data Intelligence all point in the same direction. Employees are getting both mental and physical benefits as well as being able to improve general performance and productivity. People are reporting that they are happier, feel like they are being trusted and can work better with their teams when they meet.

At SketchLabs we are seeing larger employers and blue chip organisations take up smaller office spaces but still have the perks of a central reception, breakout areas and even small things like a coffee station where people can meet, talk and brainstorm. This helps to build good relationships amongst employees as well as developing collaboration with other businesses who are operating in the same building. I.e. a web design organisation with a fashion brand.

The more businesses adapt their strategies to build hybrid teams and develop their best practices working in this space, the more we will see serviced offices fulfilling the needs of these businesses, helping to reduce costs and give flexible options in an ever-demanding economic landscape.

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