May 22, 2020

WeWork could fail as costs spiral and social distancing hits offices, real-estate boss predicts

By Theron Mohamed

Troubled coworking giant WeWork could fail in the next few years as its costs spiral and the coronavirus pandemic upends its business model, Michael Franco, the president of Vornado Realty Trust, said on the real-estate investment group’s earnings call this month.

“Their ability to survive is dependent on SoftBank’s willingness to fund those deficits, which will probably be more significant near-term given this crisis,” Franco replied to an analyst’s question about how long WeWork will stay in business, according to a call transcript on Sentieo, a financial-research site.

WeWork’s business model of signing long-term office leases, refurbishing and dividing up the spaces, then renting them out on a short-term, flexible basis is “driven by high density,” Franco said.

“That’s obviously a challenge now,” he added, noting that more people are working from home and governments are enforcing social-distancing measures to combat the spread of coronavirus