Future of WeWork Australian hubs now under a cloud

The Australian headquarters of besieged international office designer WeWork refuse to speculate about the future of their workplace hubs in Sydney, Brisbane, Perth and Melbourne as the parent company in New York faces mountainous financial pressure to survive.

Once the darling of the New York stock exchange for its seeming ability to turn redesigning and refurbishing office space into a billion-dollar business, WeWork is now mired in exhausting debt with experts saying it needs a $6b cash injection just to survive. 

WeWork’s North Sydney location. Source: WeWork

The financial dramas have raised questions about the future of WeWork’s offices and staff in more than 100 countries, including Australia.

The company has opened 20 offices in Australia catering to start-ups, freelancers and innovative entrepreneurs – 10 in Sydney, five in Melbourne, three in Brisbane and two in Perth. 

In Sydney prices start at $2380 a month for a private office to $550 a month for a hot desk. 

Staff at the hubs is estimated to be in excess of 100.

WeWork rejected an opportunity to comment on the financial stability of their Australian hubs and their future.

“Thank you for reaching out. We are in a quiet period and so will decline to comment,” said Tanya McCloy, the senior manager of public relations. 

The company’s website is still offering enticements such as:

“Whether you’re an established enterprise or a growing start-up, discover spaces that inspire your staff’s most meaningful and impactful work.”

Meanwhile, in America speculation continues to mount about WeWork’s next move to secure the long term viability of the company in the face of damaging headlines.

The company is also said to be asking its backer, Japanese technology giant SoftBank which has already provided $10.5 billion for more money to keep going.

WeWork’s plans to for IPO were delayed indefinitely earlier this month when the company could not produce financial records to justify its supposed valuation of as much as $US70b. Some valuations of the company are now as low as $US10b. 

Critics have not been kind.

“Other ‘unicorns’ (privately held start-ups valued at over $US1 billion) that have recently taken the plunge into publicly listed life such as ride-hailing giant Uber and messaging service Slack have languished on the stock market,” one said  

“But WeWork might be the first unicorn to truly have its horn ripped off.”  

Others say WeWork, known for its lavishly-styled shared office spaces, has seriously disrupted commercial real estate in many of the world’s major commercial centres, growing from one block in New York to 528 locations in 111 cities internationally.

But the profit and loss columns on its expenditure is less impressive.

In 2018, the company lost $US1.9b on revenues of $US1.8b mostly because of the high costs of reinventing its office spaces.

Things improved slightly first half of 2019 with $US1.5b on losses of $US904.6m. 

Nonetheless, WeWork is still a long way from profitability and will need further cash injections to stay viable.

Rumours in the Wall Street Journal suggest it’s going to take on $US6b in debt with an asset-based loan.