WeWork Announces Closures Of 14 Office Sites In California

Following their bankruptcy announcement earlier this week, co-working space company WeWork announced a mass closure of almost 70 prominent offices across the United States on Tuesday, with California to have 14 locations to close soon mostly in the Bay Area and LA areas.

Founded in 2010, WeWork rapidly grew as a company throughout the decade, renting out large office spaces in larger cities, and in turn, bringing in individual office workers to work there in shared spacious in lieu of a company or home office. Within 4 years, the company became the largest lessee of office space in New York, and by the end of the decade had expanded to dozens of countries, grew to over 700 individual office locations, and entered the education market. California was one of the main areas of focus for the company during this time because of the ongoing tech boom and the demand for shared offices spaces in cities like Los Angeles.

However, financial issues soon plagued the company. WeWork lost over $2 billion in 2018 alone, and had their stock evaluation plummet in 2019 from an initial $47 billion estimate to only $10 billion. Legal issues, especially those around former CEO Adam Neumann, also arose. The company declined even further in 2020 and 2021 because of the COVID-19 pandemic closing offices nationwide, with the first layoffs and location closures in company history occurring.

By 2023, the company was in rough shape. The stock price fell below $1, a new evaluation found the company to be worth less than $400 million, and an imminent bankruptcy was warned of in August. This all led to the bankruptcy announcement on Monday. While there was hope that office closures could be forestalled, the company announced on Tuesday that nearly 70 of their remaining locations would close. 40 locations are to close in New York City alone, with 14 to close in areas across California. According to the filing by WeWork, six office locations, including two on the famed Market Street, are to close in San Francisco, three are to close in Los Angeles, two are to close in Santa Monica, and one each are to close in Oakland, Manhattan Beach, and Irvine.

14 WeWork Closures in CA

While WeWork’s bankruptcy and need to keep more profitable locations was part of the decision, the decline of office usage post-COVID significantly played a factor. Specifically, many companies who either owned buildings or held long-term leases in buildings subleased office space out at cheaper rates than WeWork. Recently, this has been seen by AI firms taking over offices at a cheaper rate in cities like San Francisco because of the massive amount of open office space in the city and eschewing options like WeWork.

In a statement, the company said that “The reorganization will help address our high cost and inflexible lease liabilities. The locations included in today’s Court filing are largely non-operational and all affected members have received advanced notice.”

Experts told the Globe on Wednesday that regardless of the reason behind the closures, companies like WeWork faltering will harm the recovery of cities like San Francisco currently trying to recover by enticing more companies to set up companies within the city.

“San Francisco is most hurt by these closures,” explained Michelle Duggan, a building occupancy researcher. “Despite AI companies moving in and other emergent tech companies doing the same, vacancies are continuing to grow. At last count it was at about 35% vacancy in the city. Now, WeWork offices individually aren’t all that big. Maybe a floor or two of office space. But add them all together and they can get pretty big in terms of floor space. Well, six locations in San Francisco isn’t helping things there, and that is another chunk that will have a hard time finding tenants..

“LA and other cities will rebound quickly, as they’ll find tenants pretty easily. But WeWork tended to get the more expensive locations to entice people to work there, so those spots will be harder to fill. Building owners can offer a reduced rate, but everybody is already doing that in some way.

“And in some ways, WeWork closures are worse than regular company closures. A company closes or moves, that is one big area vacated and easy rent back out in one big agreement or piecemeal out. Size isn’t an issue. With smaller spaces like WeWork, it becomes harder to rent because it is a smaller finite space. Oh, and WeWork added a whole bunch of expensive things like more kitchen gas and water hookups or outlets in odd areas that the next tenants will have to deal with.

“More vacant office spaces was the last thing San Francisco needed, but here we are.”

More WeWork office closures are expected to be announced as bankruptcy proceedings move forward into 2024.