Real Estate

WeWork Says New Business Model Will Drive Profits By 2023

WeWork

In a staff presentation, new WeWork Chairman Marcelo Claure tore up the old business model of the company and promised the group would move away from taking on long-term leases in many cities. While the firm would still sign its own leases in the top 12 or so markets such as London and New York, it would make deals to manage properties for landlords in other places instead, the Financial Times reported, citing an unnamed source.

Claure has also brought on new executives to the leadership team of the company, with the inclusion of former Publicis Groupe CEO Maurice Lévy. Two more executives are also coming from SoftBank. The coworking company could also sign revenue-sharing deals with landlords in some markets and open franchises in places like Africa and the Middle East.

The changes are part of Claure’s roadmap to get the firm to profitability. That goal has become a priority following the firm’s failure to seal fundraising through a public offering that led to a cash crunch in the fall. The Japanese telecoms and technology group SoftBank, which is the largest backer of WeWork, rescued it and brought on Claure as chairman in October.

WeWork has opened almost 300 offices in the past year and now has offices in 127 cities. It is still believed to open hundreds later in 2019 and next year, even though it has greatly slowed down its new lease signings.

The news comes as WeWork is reducing its worldwide workforce by 20 percent — a total of 2,400 employees — as it strives to cut costs and revamp its struggling business. The downsizing follows major losses, a failed initial public offering (IPO) and the resignation of Co-Founder and CEO Adam Neumann.

The firm is also expected to lay off 1,000 more employees working for extraneous divisions that will be closed or sold. And approximately 1,000 maintenance employees will be outsourced to real estate services company JLL or one of its partners. Maintenance employees were told they would receive similar benefits as well as pay.

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