- Co-working office provider WeWork will become London’s biggest private user of office space.
- The move represents a big bet on the resilience of post-Brexit London’s office market.
The seven-year-old New York firm, valued at over £15 billion ($20 billion), is known for its trendy co-working offices which feature free beer taps and other perks. It currently operates 17 offices in London and is set to announce a further 10, according to CoStar’s data.
The move represents a big bet on the resilience of post-Brexit London’s office market. Business Insider reported in October that the firm had signed up to lease commitments in London of more than £2 billion over the next 25 years.
WeWork signs a long-term lease on a building and then sub-letting component parts of it on much shorter terms. The model has so far proved a hit with startups but could prove risky in a cyclical downturn, which many analysts believe London is heading towards.
WeWork has argued that uncertainty surrounding Brexit will support its business because firms will avoid long-term commitments. Industry figures, meanwhile, have warned that WeWork’s business model is untested.
“[Flexible operators have] been accumulating a lot of space, they’re all in expansion, and… they’re not cycle-tested,” said Kevin McCauley, head of London research at commercial property firm CBRE in November.
That is “something really to beware of, because we’ve been through this previously. I would argue that the economy and the market has changed, but again, the model is yet to be tested,” McCauley said.
Flexible office space provider Regus expanded massively during the dotcom boom of the late nineties but was forced to rapidly downsize when the bubble burst in 2000.
WeWork has also been accused of using questionable, but legal, tactics to fuel its expansion in the UK. Rival firms accused the company in November of using tactics such as snooping on their premises and aggressively targeting tenants to fuel its growth. The company declined to comment on the allegations.
Business Insider has contacted WeWork for comment.