This post was originally meant to be the intro text for my coworking newsletter for Week 32, 2023.
But given the (what I believe are) important topics it touches on, and that it’s about a thousand words too long for an email intro, I’m sharing it here on my personal blog instead.
An emotional rollercoaster of epic proportions.
Three big, apparently disconnected, events happened this week in the coworking/flex space industry:
It’s speculated that WeWork may need to declare bankruptcy, soon.
IWG Plc (owner of Regus, Signature, and other flex space brands) reported record revenues.
Coworking spaces around the world celebrated the 18th International Coworking Day.
Each of these created waves across industry circles, slack and social groups, and blew my phone and inboxes up with messages from investors, industry practitioners, concerned businesses, and even family members. The latter is how I know it’s not just us industry insiders following coworking anymore.
So I’d like to take a second to address each, show how they’re actually pretty interconnected and provide some unsolicited but hopefully helpful hints at possible new opportunities.
But before we do… some quick legalese…
Disclosure
Note: This post only provides information and my personal opinions and does not constitute financial or legal advice in any way or form. The opinions in this post belong to the author and have not been verified or validated by any financial or legal professionals. It is strongly suggested that you seek professional advice before investing or engaging in any financial activities. The information in this post may not be accurate, complete, or reliable. Hector Kolonas, my businesses, partners or any employers are not liable for any damages or losses caused by relying on the information provided in this post.
Reactions to the possible bankruptcy.
ICYMI: WeWork issued a warning about a possible bankruptcy, noting “substantial” doubt around the continuance of its operations if liquidity and profitability are not improved greatly within 12 months.
The news was received very differently across the industry.
Some leaders of industry firms jubilated about the “final fall of the overfunded hype machine” that was recently portrayed in TV shows and documentaries. Given the firms aggressive growth hacking and market-entry strategies, the reaction from operators who lost members and revenue to free-rent deals and 100% broker commissions is totally understandable.
Other leaders are concerned about fallout from investors, capital markets or landlords for “similar” flex-space businesses.
Office landlords, often carrying inflated debt and vacant floors, are worried about rental delinquencies from the firm.
Retail investors saw WeWork’s stock price drop to $0.13 (down 38.4% today alone), continuing the downward spiral from the $11.78 per share after its first day of trading on October 21st, 2021.
Vendors, suppliers, staff and businesses based in WeWork locations are also obviously concerned and many are exploring business/career continuity scenarios.
What a bankruptcy could mean.
It’s worth remembering that bankruptcy is a legal and financial tool for restructuring their obligations and business.
It could mean the end of a brand or business, but often it can be quite the opposite.
Within the industry we’ve sen IWG leverage or explore bankruptcies to restructure in 2002, 2007 and most recently for some locations in 2020.
And what else did we see in industry news this week? That IWG reported stellar results including a 14% bump in six-month revenue to £1.7B, a £54M debt reduction, and a 48% growth in EBITDA.
So this means we could see a few outcomes here:
- They call it quits, and close up all 231 locations. Unlikely.
- They restructure their overheads & debt to keep growing net profit margin.
- They get taken private by a PE firm during bankruptcy proceedings.
- They get taken private by IWG (see my previous post here).
- Ousted co-founder Adam Neumann absorbs WeWork into Flow.
Either way, I don’t think it’s the end of the road for WeWork. Not by a long shot.
And it seems, I’m not the only one who thinks that.
Let's say the 
does hit the fan.
Ok, let’s assume for a second it all goes terribly wrong and WeWork just… disappears.
What does the big gaping vacuum of flex space mean for the industry, and you as flex space professionals?
Let’s break that down a little as there’s a lot of moving parts.
Their office space.
With 231 (I believe) locations operating at time of writing, that’s a lot of office space to suddenly become available.
But it’s also millions of square feet of equipped, connected and often revenue-generating flex space.
Operators who can demonstrate strong unit economics, great experience and a lot of creativity could swoop in here and grow their own networks and pretty quickly. Also with minimal capex requirements due to existing build outs.
Their staff.
A lot of talented, personable, friendly, and now quite experienced flex space professionals work at WeWork.
Some will spin out and build their own businesses. Others will seek other flex space roles and communities to call home.
Their members.
Business who bought into WeWork memberships, both office and drop-in access, may need alternatives.
They understand the model. They understand the benefits. You could just show how you’re different and who you’re right for and see an influx of new members, businesses and revenues.
Their investors.
Some investors may lost money on WeWork. Some may have lost a lot.
But flex space as an industry is thriving, and growing from strength to strength.
Not only did IWG report record results, but we’re seeing expansion of many great brands (EXPANSIVE, BLANKSPACES, Industrious, Mindspace, Huckletree, etc etc) and growing franchise demand (VentureX, Serendipity Labs, Regus, etc).
There’s still a forecasted under-supply of great flex space, with not enough supply to meet all the businesses who are switching away from traditional long-term leases.
Investors, especially those watching where the puck is going, will pick up on this and find ways to invest in individual spaces, groups, solutions or networks.
But.. and this is probably most important part…
Of the estimated 19,400+ coworking spaces worldwide, the vast majority are “indie” spaces, focussing on supporting specific communities, neighborhoods, niches and markets.
And that brings us to the last of the three surprisingly interconnected stories: International Coworking Day.
All over the world, coworking spaces and professionals celebrated the 18th annual international coworking by inviting the public in to try coworking, celebrating their members, partnering with local creatives and businesses and more. See #CoworkingDay on Twitter and Instagram for some examples.
So in summary.
A lot has happened since the first coworking-style spaces opened in 2015, and a lot will happen this year and in the next 28 years.
The one thing I’m certain of is that regardless of whether WeWork comes out of this stronger, or vanishes suddenly, coworking and flex space businesses will continue to evolve, grow and support more and more humans and ideas.
And to all of you who create and nurture coworking communities, I hope you had amazing International Coworking Day celebrations. Here’s to your next 18!