WEWORK, Inc. isn’t working — again. The flexible-working startup once worth $47 billion that tried to make the office a party has lost its CEO and CFO in the space of a few days. Its share price has fallen to levels that could see it delisted. At a time when so many workplaces are seeking a “wow” factor to woo the laptop class back to the office, it’s a cautionary tale.
WeWork’s problems, ranging from cash burn to high debt, have been around for a while. What’s new is that WeWork seems to be failing to shine amid the strange post-Covid circadian rhythms that should favor flexible offices. With everyone from Alphabet, Inc.’s Google to Deutsche Bank AG going “hybrid” for the foreseeable future — with neither remote working nor the office winning outright — WeWork is still failing to break even. First-quarter occupancy of 73% was below its full-year target of 76%.
The company looks just as vulnerable as the rest of its office brethren. For all of the reports about the future of work and new amenities like rooftop bars for mixing post-meeting martinis, there’s no magic formula to address rising interest rates, increasing layoffs and tech retrenchment in the world of white-collar work. This has squeezed demand and attracted short sellers to WeWork’s stock — Bloomberg Intelligence’s Arnold Kakuda says the return-to-office push feels “tapped out.” Badge data point to occupancy rates around 50% in several US metropolitan areas, which have flatlined.
And for those arguing that creating more fun in the office will help, WeWork’s woes suggest otherwise. With younger workers already keen to network in the office and worried about being laid off, a Bloomberg Intelligence survey published in February found that older workers had adapted to flexible work the best, with a rising share of 55-65 year-olds changing employers. It also found that commuting — not cocktails — was overwhelmingly the issue, with two-thirds of respondents saying high transport costs discouraged them from going to the office.
So for all of the criticism of work-from-home from the likes of JPMorgan Chase & Co.’s Jamie Dimon — who called it management by “Hollywood Squares” — the cliche of the office-loving manager and the stay-at-home Gen-Z worker bee looks off. If cities and workplaces really want to lure people back to their workplaces, perhaps they should make them better to work in, not party in. Improved public transport, more affordable real estate, quieter workspaces with faster Internet would change the game. Given studies that show the average knowledge worker needs as many as 23 minutes to get back on track after being interrupted, who wants to work to the sound of a ping-pong table?
WeWork itself seems to have gotten this message, though perhaps a little late. I spoke to Julien Thooris, the chief marketing officer at one of its startup tenants MyTraffic, about life in a recently opened WeWork in the heart of Paris. He said the atmosphere was “studious” — not a word you expect to associate with the brainchild of Adam Neumann — and that the main attractions were lease flexibility, the bundled cost of cleaning and utilities, and its central location, rather than the prospect of a happy-hour cocktail.
Developers may be right in thinking that whatever went wrong with WeWork’s first incarnation, there is something to the idea of tech-style flexibility and less dingy offices after Covid: Some 20% of European offices could become co-working spaces according to Savills. But as WeWork’s plunging stock price suggests, the return to the office is proving to be no party. — Bloomberg Opinion