The Ghost Of Office Past, Present And Future: How Landlords Are Managing After WeWork's Bankruptcy

In 2019, the coworking giant was valued at $47B, with landlords of 850 locations across the world locked into leases with WeWork. CMBS debt exposure to the tenant exceeded $204M across 10 deals alone, according to data provided to Bisnow by Moody’s CMBS.

Three months after a judge approved WeWork’s exit from bankruptcy, WeWork’s new footprint consists of 600 locations. In the vast majority of leases the company has assumed, WeWork has negotiated concessions, including reduced rent, shortened lease terms and a smaller footprint. 

At those locations, landlords have time to scout new tenants. But at others, office owners are scrambling to fill space WeWork vacated, and some are facing financial distress.

Several property owners have already been unable to extend their loan terms. At least two former WeWork locations have been sentenced to receivership. Another three are staring down likely foreclosures, and others are in negotiations with special servicers, according to a Bisnow analysis of CMBS commentary and other reports. 

“Would you want to give a five-year loan to somebody who has a tenant that's expiring?” Anchin Real Estate Group Leader Robert Gilman said. “If you had to put all their New York City leases and line them up, some are going to fall in the bucket that they're lendable, and some are going to fall in the bucket that they're not.”

WeWork declined to share details on lease terms. It has since reemerged as a private company, with Yardi Systems as its majority owner.

“The primary goal of our portfolio optimization was to retain as many buildings as possible while reaching new lease terms that would support successful and sustainable operations, both for WeWork and our landlord partners,” a WeWork spokesperson said in a statement. “Any decision to leave a building was not taken lightly, and we are immensely grateful to all of our landlords, both current and former, for their partnership and understanding.”

The coworking operator's lease terms are now as short as one year. At 881 Peachtree in Atlanta, where WeWork had an agreement set to expire in 2032, the lease now runs for a year with options to renew, co-owner The Loudermilk Cos. told Bisnow in February. At Summit II in Bellevue, Washington, WeWork’s space was put up for lease starting June 2025 the day after it assumed the space, according to a stacking plan reviewed by Bisnow.

At 575 Lexington Ave. in Manhattan, WeWork’s coworking space has been converted to a flexible workspace and lounge accessible to its members and other tenants in the building.

Even still, some owners have reoccupied space quickly, despite a challenging office market. Last year, approximately a third of vacated WeWork space was filled, according to CoStar data.

In several cases, competitors have scooped up those leases, especially as the coworking sector has boomed.

That includes Industrious’ 10-year, 240K SF lease at Tower 49, WeWork’s former New York City headquarters and one of its largest locations. At The Jacx in Long Island City, Tishman Speyer took back 217K SF to operate under its own flex workspace brand, Studio by Tishman Speyer. In Chicago, Workbox filled 29K SF of a former 112K SF WeWork at 125 S. Clark St., according to lease data provided by Compstak. 

Wharton Property Advisors President and CEO Ruth Colp-Haber, who has worked on WeWork leases, said these are the ideal situations for landlords, even if it is a management contract rather than a lease.

“It’s a tenth as profitable as the prior long-term leases that WeWork had,” Colp-Haber said. “But what the landlords really try to avoid these days is doing a lot of construction. When you have to rebuild the space, not only do you have the upfront expense of the actual construction, you have easily a year of downtime.”

For many other former WeWork landlords, especially those with older buildings, tenants — coworking or otherwise — aren't biting. More than 60% of the company’s Manhattan leases were in Class-B and Class-C buildings. 

And it isn't just a WeWork issue.

In the first half of the year, availability at New York City trophy buildings ticked down 10 basis points to 12.2% and fell from 19.3% to 18.8% at Class-A buildings. At the same time, more than 1M SF of Class-B space became newly available as tenants consolidate and look for newly constructed, amenity-rich space, according to JLL.

In at least two former New York City WeWork locations, 419 Park Ave. S. and 980 Sixth Ave., office space is being converted to residential use. Another, 315 W. 36th St., was in talks to be used as a migrant shelter but has since been subject to foreclosure and is in the hands of receiver Trigild, according to commentary on Morningstar Credit’s database. 

A receiver order was also entered for APF Properties’ 25 W. 45th St. last month. WeWork’s exit, along with other lease expirations, caused the building’s occupancy to drop to 70% before being transferred to a special servicer in December, according to servicer commentary on Morningstar's database. 

Winter Properties is also facing foreclosure on a $55M loan tied to 57 E. 11th St., which WeWork once fully occupied but departed as part of its bankruptcy.

Similarly, borrowers for Brooklyn’s 195 Montague St. and Hollywood’s 7083 Hollywood Blvd. are working with special servicers to renegotiate debt terms.

In a few instances, WeWork has assumed its lease only for the pain to continue.

At 1440 Broadway, a property subleased to Amazon, WeWork agreed to keep all 300K SF. Owners CIM Group and Australian pension fund QSuper have managed to extend the property’s $399M CMBS loan maturity date and avoid foreclosure, but the building’s valuation has been slashed to $320M, a 46% cut from $595M in 2021.

A similar scenario is taking place at Charles Cohen’s 750 Lexington, where its valuation has been hacked from $300M in 2015 to $50M despite WeWork’s agreement to pay $1.1M to assume its lease. As part of the new agreement, WeWork also shortened its term and converted to a gross lease with a revenue share structure, according to Morningstar. 

Such situations cause lenders to keep a close eye on properties still facing high exposure to WeWork.

Of the 15 buildings backed by CMBS loans where WeWork is listed as a tenant, 13 are performing, although eight are on watchlists. WeWork exposure in those properties varies from being 100% filled by the firm, such as at 6543 Las Vegas Blvd S. in Las Vegas, to being just 10% occupied by the company, like at the Washington Mutual Tower in Seattle. 

“Let's face it, they've been out of bankruptcy now for four months, and there's a perception [issue],” Colp-Haber said. “But everything's been reworked, and their financials are going to be attractive now.”

Contact Sasha Jones at sasha.jones@bisnow.com