TikTok’s London office is based in a WeWork building in Holborn called Aviation House.
WeWork, the U.S. office leasing startup, filed for Chapter 11 bankruptcy protection and threatened to close offices across the U.S., where it has become a key destination for tech firms.
The company’s restructuring could also impact its London offices, where it is one of the largest tenants.
The company has 36 offices in London covering more than 2.89 million square feet, according to CoStar, a commercial real estate data firm.
WeWork, which was valued at $47 billion at the peak of its rise in 2019, said Monday that its bankruptcy filing was limited to the company’s locations in the U.S. and Canada.
However, uncertainty remains for WeWork’s London operations and international offices.
At least one real estate group has already tried to end its lease with WeWork in the past week as the company’s liquidity situation appears more precarious.
Is there trouble over commercial property in London?
WeWork is a major property landlord in London.
Citing an analysis of WeWork’s websites and CoStar’s own data, CoStar said M&G and Nuveen are both landlords of two of the buildings where WeWork currently has a presence.
The largest single landlord affected by WeWork’s financial difficulties is Almacantar’s 290,000-square-foot Southbank West in Waterloo, CoStar said.
M&G, Nuveen and Almacantar were not immediately available for comment when contacted by CNBC.
London’s most exposed submarket is City Core North, where WeWork occupies 684,000 square meters.
When contacted by CNBC, WeWork was not immediately available for comment.
Deepak Tailor, CEO of LatestFreeStuff, a startup that offers online gifts to its customers, said he doesn’t know what will happen to the office building his company currently occupies in Tower Bridge.
“We actually have an agreement with them for another seven months,” Tailor, who is based in London, told CNBC.
“We are a bit stuck. I don’t know where we stand from a legal perspective at the moment. … From the communications we’ve received, it looks like they’re trying to carry on as usual,” he added.
Tailor has been in his WeWork building for eight years, he said, and found it a pleasant place to work because the office offered free draft beer.
Now he fears that these free beers will soon run out. “I don’t know if I still trust them as a brand after this,” Tailor told CNBC.
WeWork has suffered one of the most spectacular corporate collapses in recent history in recent years.
The company’s attempt to go public failed five years ago, and since then it has been hit hard by the Covid-19 pandemic, which caused further pain as many companies abruptly ended their leases.
The ensuing economic downturn also led to customers canceling their WeWork memberships.
In a regulatory filing in August, WeWork said bankruptcy could be a concern.
The company has stated that its spaces will remain open and operational and that it will continue to offer its coworking experiences to its members.
Rental agreement expires
Helical, a real estate investment firm, recently announced that it has surrendered its lease for six floors of The Bower office project in London to WeWork.
Helical said this was due to “non-payment of rent for the September quarter”. The company entered into a short-term licensing agreement with WeWork, which has since reoccupied the building.
According to Helical, WeWork is obligated to pay Helical a fee equal to the entire September quarter rent and service fee due under the terms of its prior contractual agreements.
Helical said it was “working on the next steps for the division” and would update its half-year results on November 22.
WeWork is a tenant and not a standalone real estate investment company. The company rents properties from commercial real estate firms and then rents them out to businesses at higher prices, making a small profit on the difference. Several investors expressed skepticism about the company’s business model.
— CNBC’s Rohan Goswami and Ari Levy contributed to this report.
Source : www.cnbc.com