WeWork may cut staff as early as this month

According to those who attended the staff meeting, executives said they expect WeWork to continue to grow but at a slower pace, and that the company planned to make some divestitures as part of an effort to "right-size" its business.
According to those who attended the staff meeting, executives said they expect WeWork to continue to grow but at a slower pace, and that the company planned to make some divestitures as part of an effort to "right-size" its business.PHOTO: REUTERS

Troubled office-sharing giant's move comes even as 2 reports say co-working is here to stay

SAN FRANCISCO/SINGAPORE • WeWork's leaders told staff that job cuts are coming as soon as this month.

In a meeting with employees on Thursday, new co-chief executive officers Artie Minson and Sebastian Gunningham and co-founder Miguel McKelvey said that cost-cutting efforts would include layoffs, according to attendees, who asked not to be identified because the forum was not public. The cuts will be handled as "humanely" as possible, Mr McKelvey and Mr Minson said, according to the people.

Bloomberg reported last week that WeWork parent We Co is considering job cuts and the eliminated positions could number in the thousands. WeWork had 12,500 employees as of the end of June.

A WeWork representative declined to comment.

Mr Minson apologised to staff at the meeting about the uncertainty that has roiled the company in recent weeks. The discussion took place at WeWork's Manhattan headquarters and was live-streamed to all employees.

Since WeWork's plan for an initial public offering went badly awry, leading to the ouster of co-founder Adam Neumann as CEO, the company's new leadership has said it plans to re-emphasise its office-rental business. As part of that, WeWork is said to be exploring a sale of several of its recent acquisitions, including event-organising platform Meetup, office management start-up Managed by Q and marketing company Conductor.

Executives said clients and tenants were still interested in WeWork's offerings, and implored staff to focus on its core business and customers. The executives also said they expect WeWork to continue to grow, but at a slower pace, and that the company planned to make some divestitures as part of an effort to "right-size" its business, according to the attendees.

This was backed by two separate reports released yesterday in Singapore by Jefferies and DBS which noted that the co-working business is here to stay despite recent concerns about the office-sharing giant.

Bloomberg reported last week that WeWork parent We Co is considering job cuts and the eliminated positions could number in the thousands. WeWork had 12,500 employees as of the end of June.

WeWork's recent developments might speed up consolidation among operators, but Jefferies analyst Krishna Guha believes co-working is here to stay as traditional tenants embrace a "core plus flexible" concept and smaller firms seek to lower fixed costs and ease business expansion. More work is done by cross-functional project teams which move to different countries once a project ends, he added.

DBS Equity Research analysts Rachel Tan and Derek Tan said demand from entrepreneurs, freelancers and start-ups will support the industry.

An important consideration is the operator, and those backed by landlords or developers such as Distrii by City Developments, JustCo by Frasers Property and The Work Project by CapitaLand are more viable options, added DBS.

Although Singapore's overall co-working space has tripled since 2015, its total net lettable area (NLA) of 3.7 million sq ft make up only about 5 per cent of islandwide office space.

DBS said S-Reits (Singapore real estate investment trusts) have a 2 per cent or less portfolio NLA exposure to WeWork except for CapitaLand Commercial Trust (CCT) and Frasers Commercial Trust.

CCT has the largest exposure to WeWork, at about 4 per cent of total NLA, mainly due to a seven-year lease it signed with WeWork for 21 Collyer Quay that starts from the second quarter of 2021. "In the worst-case scenario, where WeWork fails to undertake the lease, there is still time for CCT to find alternative tenants as the building sits on a prime location in the Central Business District," said DBS.

Singapore now has the second-highest number of co-working centres in Asia, behind Tokyo.

BLOOMBERG, THE BUSINESS TIMES

A version of this article appeared in the print edition of The Straits Times on October 05, 2019, with the headline 'WeWork may cut staff as early as this month'. Print Edition | Subscribe