[New York Diary] 34 Locations Closed in Manhattan... Inside the 'Bankrupt' WeWork

Stories from Everyday Life in New York

For those looking for a workspace in Manhattan, New York, USA?infamous for its high cost of living?'WeWork' was undoubtedly a great choice. It secured as many as 47 office buildings within New York alone, offering excellent accessibility, comfortable office spaces, relaxing areas that feel like a stylish cafe, shared kitchens with free coffee and water, and various facilities including printers and copiers. Yet, it was never overcrowded. Occasionally, fun events for users were also held.

However, paradoxically, all of this is also "why WeWork's bankruptcy is not surprising at all." After news of the bankruptcy protection filing broke, on the 9th (local time), about 50 people were scattered around working in the WeWork office in the Kip's Bay area of Manhattan. While not a small number, considering this office spans four floors, it is far from profitable. Within 200 meters nearby, there are as many as three WeWork offices clustered together. Moreover, following the recent bankruptcy protection filing, WeWork decided to close 35 of its 47 locations in New York (34 in Manhattan, 1 in Brooklyn), reducing its footprint. At this point, it is questionable whether WeWork even considered supply and demand forecasts during its past office expansion.

Another WeWork office in the NoMad area of Manhattan was also nearly empty. An employee working at the community desk said, "Everything is running as usual," emphasizing, "Since the bankruptcy reports came out, many people have asked, but this building is fine. Only refinancing will happen." There was a clear attempt to soothe concerns that members might leave en masse due to the bankruptcy impact. Hailey, a worker in her 30s at this location, said, "The bankruptcy news is not surprising," adding, "Honestly, as a user, I found it convenient that WeWork was everywhere in Manhattan, the facilities were good, and it wasn’t crowded. But I always had doubts about whether such an operation could be sustainable."

WeWork, which started in a building in Manhattan in 2010, grew into the world's largest shared office service company operating over 800 offices in more than 120 cities worldwide in less than a decade, but it has never turned a profit in any year. This is due to a cost structure where fixed costs such as rent and facility operation expenses increase faster than revenue. Once valued at $47 billion (about 62 trillion KRW), the company ultimately had to file for bankruptcy protection in a New Jersey court on the 6th.

Although it touted itself as an innovative technology company and rapidly expanded, WeWork’s essence is actually a real estate subleasing business sensitive to economic cycles and interest rates. The COVID-19 pandemic, which spread remote work, dealt a direct blow to its business model, and the sharp rise in U.S. benchmark interest rates increased various cost burdens. Rent adjustments are the only way to expect profit improvement, but considering soaring vacancy rates, even this is difficult. Additionally, the founder’s unethical management also contributed to WeWork’s downfall.

"The next decade will be the era of ‘We’," WeWork declared as it revolutionized workspaces worldwide, but it will now remain a representative failure case of a startup chasing growth alone. In New York, where as many as 47 office buildings were operated, warnings are pouring in that the WeWork fallout will hit the commercial real estate market already facing a crisis due to high vacancy rates. WeWork announced the closure of about 70 offices in the U.S. along with its bankruptcy filing, with roughly half of these located in New York.