WeWork wriggling out of property leases in Hong Kong

Hong Kong — WeWork, the cash-strapped co-working company whose initial public offering (IPO) failed, is weighing giving up office floors in at least half a dozen locations in Hong Kong, one of the world’s most expensive property markets.

New York-based WeWork is considering surrendering a portion of a recently signed lease in Wan Chai, near Hong Kong’s central business district, according to people familiar with the matter. The firm leased four floors, or around 5,574m², for nine years in the Hopewell Centre in August, one of the people said, asking not to be identified because the details are private.

Agents are approaching clients on behalf of WeWork to replace it in five other locations across the city, another person said. Those locations are in various stages of renovation but WeWork would consider relinquishing them if it finds companies willing to take over, that person said.

The decision to review the space comes as WeWork slows its expansion to stem losses and convince investors its business model is viable after a dramatic financial implosion. After pulling its IPO in September, the troubled group received a $9.5bn (R140bn) rescue package from SoftBank Group in exchange for a raft of changes, including the ouster of co-founder Adam Neumann.

No new buildings

SoftBank’s billionaire founder Masayoshi Son said on Wednesday that WeWork would stop adding new buildings for the next two to four years. Son also said there would be no more rescues, calling WeWork an exception. He added WeWork could generate $1bn in annual profit in four to six years.

The potential retreat in Hong Kong comes after WeWork said just last week that it plans to expand its footprint in the city and open four new locations this quarter. Some of those are among the spaces it is now looking to vacate.

“New executive leadership is evaluating our operations and assets across all geographies, including Hong Kong,” a spokesperson for WeWork said in an e-mail. “We are fully committed to improving the business and ensuring our long-term viability to the benefit of our landlords, members, and employees.”

Hopewell Holdings, the Wan Chai building’s landlord, didn’t immediately respond to a request for comment.

WeWork’s new management is also is re-assessing whether to proceed with about 28 potential office deals in London, its second-largest market. The deals under review are at varying stages, from a preliminary inspection of promising properties to detailed talks.

The co-working company started its Hong Kong business in 2016 and quickly became the most aggressive shared-office operator in the city. It’s now secured 16 locations with nine under operation, the company said Wednesday.

In Singapore, WeWork also has an established presence. In July, CapitaLand Commercial Trust — one of the city-state’s largest commercial real estate investment trust — said it will lease out 21 Collyer Quay, a 21-storey building in the financial district currently occupied by HSBC Holdings.

A CapitaLand Commercial Trust spokesperson said on Wednesday that a binding lease agreement for a period of seven years starting from the second quarter of 2021 hasn’t changed.

Bloomberg