Here’s a Breakdown of Which Markets Face the Biggest Risks from WeWork’s Downfall

As former GGP CEO Sandeep Mathrani rolls up his sleeves to fix the problems with WeWork as the company’s newly appointed CEO, two real estate services firm—Savills and Transwestern—have published reports on the U.S. markets facing the greatest risk from WeWork’s troubles. Here’s a round-up of some basic facts from the reports.

1. From 2015 through the third quarter of last year, co-working operators ranked ninth for absorption of U.S. office space, according to Transwestern researchers. In the first three quarters of 2019, they accelerated their leasing activity to jump to sixth place for office space absorption, with 8 million sq. ft.
2. At mid-year 2019, WeWork accounted for 70 percent of all co-working space in the U.S., the Transwestern report states, at roughly 27 million sq. ft. in 365 properties.
3. The company also accounted for the lion’s share of growth among co-working operators over the past five years, at 71 percent. Its closest competitor in growth during the same period—IWG/Spaces—accounted for just 10 percent of growth in the co-working industry. Regus and Convene both accounted for 4 percent of industry growth, and Knotel for 3 percent. 

    

4. From 2010 to 2019, WeWork became the nation’s fastest-growing office tenant, according to Transwestern, outpacing technology giants like Amazon, Facebook and Google and the major banks.
5. The New York City office market has the greatest exposure to WeWork, with 8.09 million sq. ft. of inventory, according to the Savills report. Knotel is a distant second, with 2.14 million sq. ft. of space. New York’s overall flexible space market totals 14.0 million sq. ft., or 3.1 percent of the city’s office inventory. The bulk of that space is located in Midtown (49 percent) and Midtown South (32 percent).
6. Availability at all WeWork’s locations in New York City, including those that are already stabilized and those that are currently in the construction or leasing stages, totals 25.6 percent, Transwestern reports.
7. Los Angeles is second in the volume of WeWork exposure, with roughly 2 million sq. ft. of WeWork space inventory, Savills data shows. Its second biggest flexible space provider is Regus, which operates 598,000 sq. ft. of office space in the city. Los Angeles has 4.9 million sq. ft. of flexible office space in general, with most of it (76 percent) located in its suburban markets.
8. Total WeWork space availability in Los Angeles is 26.5 percent, according to Transwestern.
9. Meanwhile, San Francisco, which has only 2.9 million sq. ft. of flexible space options, has the highest percentage of flexible space (3.6 percent) as a share of its total office inventory. Sixty-five percent of its flexible options are located in its Financial District. WeWork is also the biggest player in San Francisco’s flexible office space market, at 1.5 million sq. ft. Knotel ranks second, with 469,000 sq. ft. of space.
10. WeWork space availability in San Francisco is at 20.2 percent, Transwestern data shows—the lowest overall of the five major markets it compared. San Francisco also has the lowest space availability at WeWork properties that are still in the construction/leasing stage, at 11.5 percent.
11. One of the major U.S. markets with the lowest exposure to WeWork is Houston, where the primary flexible office space provider is Workstyle, with a little over 1 million sq. ft., followed by Regus with 868,000 sq. ft., according to Savills. WeWork operates just 245,000 sq. ft. of space in the city. Houston also has the lowest amount of total flexible space as a share of its office market in Savills’ tally, at 3.0 million sq. ft. or 1.6 percent of total inventory.