The mounting difficulties facing WeWork in recent weeks have naturally raised questions, not only for the company’s investors and many thousands of tenants but also for landlords.

Giles Fuchs

With millions due in rent and long-term contracts now in question, it is hardly surprising that landlord concern is growing. WeWork is the largest single corporate office occupier in central London and worldwide, making up 6% of total flexible workspace demand in the UK, and its decline has the potential to send shock waves across the entire commercial property market.

Against this backdrop, WeWork’s landlords need to carefully consider their next steps to minimise disruption, secure their income streams and ultimately ensure their businesses survive.

Putting plan B in place

From my experience in managing flexible workspace and advising its landlords, lining up a contingency plan with another provider and ensuring minimal disruption to tenants must be the priorities. However, landlords should not be put off the flexible workspace model, as WeWork’s decline is the exception to the rule.

WeWork’s rapid growth over recent years has meant it is now the largest private tenant in London, with approximately $47bn (£36.7bn) in lease liabilities and fuelling about $2.3bn in cash obligations worldwide, according to Harvard Business School.

In light of the company’s stalled IPO and increasing investor anxiety, analysts are predicting WeWork could run out of money by next year, leaving its landlords faced with the daunting prospect of empty buildings and unpaid debts.

WeWork Moorgate London

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In the first instance, WeWork’s landlords need to ensure they have a contingency plan in place. A plethora of other providers exist that can easily and seamlessly step in to take over or temporarily manage the space. My advice to landlords that might be affected by any WeWork withdrawal is to identify such operators and begin talks now to ensure a smooth transition in the case of a fallout.

Another important step for landlords in securing their income stream is to prioritise reassuring WeWork tenants. Critically, landlords must communicate to tenants that they will do all they can to ensure their business will continue as usual and they will not lose their business premises. After all, if the tenants leave, so does the income. Naturally this has to be a priority.

Future of flexible workspace

Alongside this, landlords should take steps to ensure minimal disruption in their buildings for clients. This means shoring up the basics, such as making sure electricity and telecoms bills are paid, so tenants can keep operating as normal.

As landlords wait for the fate of WeWork to be decided, they should not sit idle

While some have suggested that WeWork’s troubles have brought into question the flexible office model, it would be naïve to view the whole industry as suffering from the same valuation, management and cashflow issues. The factors underpinning the growth of the flexible workspace boom — changes in how we work, the proliferation of start-ups, as well as demand from businesses for shorter and more flexible leases – show no signs of slowing down, so there should continue to be demand for this type of office space. Ultimately this means an ongoing opportunity for landlords beyond WeWork.

As landlords watch and wait for the fate of WeWork to be decided, they cannot and should not sit idle. There are basic steps they can take to mitigate the risks to their businesses, including lining up alternative providers and reassuring WeWork’s tenants that business will continue as usual. But they should remain optimistic about flexible workspace tenants.

With the exponential growth of the industry predicted to accelerate, there continues to be a rich opportunity for landlords that they should not overlook.

Giles Fuchs is chief executive of Office Space in Town