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WeWork collapse may potentially leave landlords with a £3 billion financial deficit

Uncertainty looms over the UK's largest office space provider, potentially leaving landlords faced with a £3bn shortfall. The widespread adoption of remote work, prompted by the Covid-19 pandemic, has been embraced by both employers and employees, yet has resulted in significant financial...

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Rental property proprietors may experience a £3bn deficit due to the bankruptcy of WeWork.
Rental property proprietors may experience a £3bn deficit due to the bankruptcy of WeWork.

WeWork collapse may potentially leave landlords with a £3 billion financial deficit

In 2022, a significant trend emerged as more households chose to leave London, with over 150,000 households moving to the commuter belt and beyond, according to estate agents based in the Hamptons. This exodus has been attributed to the rising cost-of-living, which has caused financial turmoil for many within the housing sector in London.

The trend has had a notable impact on London's commercial real estate market. WeWork, the UK's largest office space provider, owns nearly three million square feet of space in London, equivalent to three Shard skyscrapers. However, the company is currently facing uncertainty.

WeWork's interim CEO, David Tolley, has cited excess supply in commercial real estate, increasing competition in flexible space, and macroeconomic volatility as reasons for a decline in memberships. This decline is reflected in the company's financial situation, as WeWork still retains debts worth £3.1bn spanning 56 properties, despite closing several venues.

The cost-of-living has been a significant factor in the decision of households to move out of London, contributing to the trend of leaving the city. Notable WeWork establishments in London include the Southbank building owned by Mike Hussey's Almacantar and 1 Poultry, owned by South Korea's Hana Financial. Brookfield Property Partners are also stakeholders, owning a 285,000 sq ft WeWork facility in Canary Wharf.

By the end of 2021, WeWork held lease commitments in the UK worth £3.8bn. However, the company's UK branches now have leases valued at £3.1bn across 50 British sites. Some of these leases extend up to two decades.

The Hamptons reported seeing more than 150,000 households leave London for the commuter belt and beyond, a trend that has been observed throughout 2022. As the exodus from London continues, it remains to be seen how this will impact WeWork and the commercial real estate market in the city.

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