If it seems like there are now almost as many WeWorks as cafeterias in Miami-Dade, your eyes do not deceive you.
For the past few years, the New York-based co-working space chain has been among the fastest-growing commercial tenants here. According to real estate group CBRE, WeWork now owns 493,000 square feet of space across nine different county locations — nearly one-third of the local co-working market. That includes its new, 146,000-square-foot Class A space at Brickell City Center.
But in recent weeks, WeWork has hit the skids: Amid concerns it could soon run out of cash, former CEO and founder Adam Neumann was pushed out and two new CEOs were named; Bloomberg also reported Miami-based SoftBank International CEO Marcelo Claure would help in the turnaround. It also withdrew plans to go public.
With so much local volume, could a further downturn in the company’s fortunes cause a hit to the Miami-area commercial market?
In a statement, WeWork declined to comment on whether it anticipates closing any of its current area locations, or whether any planned locations — including two additional downtown locations — are on hold.
“WeWork’s core business is strong and we are focused on strategic expansion and profitability,” the company said in a statement. “Consistent with this strategy, we will continue to enter new lease agreements but expect the pace to slow in the quarters to come.”
In a recent interview, Claure said WeWork continues to have the full support of SoftBank, WeWork’s parent company.
And on Monday, the company released a statement saying it was working on securing new funding.
“WeWork has retained a major Wall Street financial institution to arrange a financing,” it said. “Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”
Industry players say that even in a worst-case scenario, where the company must shut down some local locations, there are enough other local co-working players — and enough demand for co-working space — to buoy both the flex and broader commercial market.
“Look at all the corporate executives and corporations moving to South Florida from other markets,” said Charles Badell, managing director of Integra Realty Resources for Miami and the Caribbean. “For many years, we relied heavily on the foreign-born population, people moving here from South America, Europe.”
Today, Badell said, relocation or expansion announcements in the past year from major financial players like Starwood Capital, Swire Properties and Icahn Enterprises demonstrate demand remains strong.
“It shows the confidence the big players have in this market,” he said.
Not all of these newly arrived companies may choose co-working spaces — but they are indicative. Tom Roth, principal at developer Grass River Property, which along with Federal Realty Investment Trust and The Comras Company is behind the One CocoWalk rebuild in Coconut Grove, said a paradigm shift has occurred in flex space.
“At one time the thinking was the space was just for individuals and small companies,” he said. “But now that the enterprise group and larger tenants have come in — ones who might be looking for something shorter-term as they explore new markets — that’s a whole new source demand. And the market has increased proportionally.”
Roth said there is plenty of runway to absorb new co-working tenants, noting Microsoft had recently moved into WeWork’s Brickell City Center location.
But Roth’s development is indicative in another way: One CocoWalk’s co-working footprint will be anchored by Spaces, the new brand from longtime player Regus, now known as IWG. He said he had received multiple offers from co-working companies to occupy the more than 40,000 square feet available when the project is completed.
“They are profitable,” Roth said of Spaces. “It’s a very strong company. We visited Spaces at other locations to get a sense of the concept, and we really liked it — it felt appropriate for our co-working needs.”
Local co-working space operators provide some examples of what WeWork could have done differently. Michael Feinstein, founder of stalwart local co-working player Büro says his company continues to “thrive” despite the presence of WeWork and many other local competitors.
“WeWork’s launch and presence over the past five years has not impacted us negatively in terms of financial performance — we’ve always operated at capacity,” he said.
Feinstein attributes Büro’s success to choosing locations that tailor to what he described as the “live-work-play” market. They include Miami Beach, Coconut Grove, the MiMo district, and a location in Hollywood.
“These are locations that are not only competitor-proof but recession-proof,” Feinstein said.
Philippe Houdard, founder and CEO of Miami-based Pipeline co-working spaces, has built out seven locations, six in Florida, since its first in Brickell opened in 2012. Locations include Brickell, Coral Gables, Doral and Fort Lauderdale.
“The industry as a whole is growing, and growing very rapidly,” he said. “For Pipeline, our strategy has been to grow methodically to build a business. The overall trend lines are still clear, irrespective of what may be happening elsewhere, the market is growing.”
Local WeWork tenants say they haven’t noticed any changes in local service beyond the closure, previously reported, of “minimart” in-house grocery stores that worked on an honor system.
WeWork is also plowing ahead on a new program, WeWork Labs, that charges interested startup tenants $475 a month in exchange for mentorship and introductions to larger companies that might be interested in its product or service.
On Friday, Bloomberg reported WeWork may seek to borrow billions to continue its operations.
For James Andrews, senior managing director at Integra, this still raises the issue of whether enough local players could step in in the event of a default.
“If the company does shut down, or reorganizes...are there similar competitors who would take up those tenants — that’s really the question,” he said.