Why WeWork’s strategy is a risky one

However, despite having bounced back since the pandemic, WeWork’s strategy remains fundamentally risky. The provider’s long-term lease structure makes for a brittle business model that has already proven to be breakable beneath the burden of fluctuating demand.

Covid-19 undeniably created significant challenges for all flexible workspace providers, but it was those with density-dependent co-working spaces and which operate with a leasehold model – like WeWork – that suffered the most gravely.

Meanwhile, it was providers that owned their building outright on a freehold basis, and those offering a serviced office space, that were better placed to tackle the pressures of Covid – without having to deal with the strain of rental obligations.

This varying degree of success for operators on leasehold and freehold models during the pandemic highlights a correction in the flexible workspace market – landlords that spread their portfolios between leased, owned and managed workspace will be better prepared to adapt to the fluidity of the market.

With many property owners now looking to enter the sector through management agreements with operators such as OSiT, which understands the market and how the right flexible workspace product can add value for their building, it is clear that commercial landlords are catching on to the bright future ahead of the flexible workspace sector.

More and more businesses are turning to hybrid working and choosing flexible office spaces in favour of traditional office spaces.

In this flexibility-focused era, the malleable lease terms and shorter financial commitments that come with freehold models make the operators that implement them more primed to thrive than those with leasehold models.

Giles Fuchs, chief executive, Office Space in Town