WeClosed

Cost-cutting is the name of the corporate game these days, and WeWork is no exception. 

What happened: The co-working giant will close 40 “underperforming” locations, ~5% of its total desk space, across the US in an effort to cut costs and achieve profitability. 

• The company is still recovering from a near collapse and subsequent bailout in 2019 after ex-CEO Adam Neumann’s hypergrowth strategy nearly drove it into the ground.
   
• WeWork’s revenues for last quarter shot up 24% (to $817M) thanks to the growth in hybrid work arrangements and demand for short-term workspace rentals.
   
• But it still announced a net loss of US$629M as occupancy rates plateaued and large companies’ share of memberships fell to 47% from 49% a year ago. 

WeWork does not own its buildings but leases office space to people, small businesses and larger companies. As a recession leaves businesses rolling back spending, it may lead to more work-from-home (WFH) set-ups, a Third Bridge analyst told The Wall Street Journal. 

Why it matters: For WeWork to survive the downturn, it’ll need to carve out a clear path to profitability. But for a business that relies on the discretionary spending of other businesses and carries massive costs tied to leases and fancy offices, that may prove to be a challenge.