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As WeWork repairs its business, a lot of space is left to fill

San Francisco

AS WeWork prepared for what it thought would be a blockbuster initial public offering (IPO), the company built out dozens of new offices and filled them with more than 100,000 desks. Once the IPO imploded, WeWork was left with a lot of space to fill and little cash to bring in new business.

The occupancy rate for its buildings dropped to 80 per cent in the third quarter, from 83 per cent a year ago, parent company We Co said in its latest business report.

The New York-based company also confirmed that it would divest business units, including the event-organising app Meetup and its investment in the Wing.

WeWork said the increase in office vacancies was a result of its rapid expansion, which added new desks it needs to fill. Occupancy rates in China and elsewhere in Asia were particularly low.

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A more favourable statistic showed customers were dropping memberships at a reduced rate of 2.7 per cent a month, from 3.9 per cent two years ago.

The newly released report had been compiled for lenders in October for a potential debt package organised by JPMorgan Chase & Co.

The data was previously only available to those who signed non-disclosure agreements, WeWork said.

Over the summer, WeWork had ramped up expansion efforts because it anticipated being a public company by the end of the year and wanted to have a strong showing for its first financial report as a public company, a person familiar with the matter has said. That was a miscalculation.

WeWork's investor presentation emphasises repeatedly that it's turning over a new leaf. One slide describes the "member experience" for its customers as "focused," as opposed to "distracted" in the years leading up to the failed IPO.

Instead of "founder-led" in the past, the company's leadership is now "proven executives" - a nod to the September departure of the controversial WeWork co-founder, Adam Neumann, who had been ousted as chief executive officer.

WeWork will now have a "disciplined focus on profitable market share expansion".

The new executive chairman, Marcelo Claure, told staff in a meeting last month to expect cuts, and people familiar with the plans have said some 2,000 of WeWork's more than 12,500 employees could lose their jobs. WeWork began cuts recently at Meetup.

Over the next three months, in order to lower expenses, the company plans to eliminate jobs in administrative, growth-related and other units, according to the report. Teams of workers who staff their buildings will not be affected.

In anticipation of further reductions, hundreds of WeWork employees have signed a letter presented to management asking for fair severance for workers, an end to forced arbitration agreements and a "seat at the table" in discussions with management.

"We want the employees who remain at WeWork, and those who join in the future, to inherit something positive we left behind", the letter said. BLOOMBERG

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