The collapse of coworking space provider WeWork could have huge implications on already-struggling office markets across the Texas Triangle.
The New York-based coworking giant, which filed for bankruptcy earlier this week, aims to climb out of its financial mess through a restructuring support agreement with creditors holding 92 percent of its secured debt, the Houston Business Journal reported.
As of August, WeWork had 18 million square feet of office space in the United States. Two months after the company announced its plan to renegotiate nearly all of its leases, the consequences of its downfall are starting to take shape.
WeWork has a significant presence in the Austin, Dallas-Fort Worth and Houston markets.
As part of the bankruptcy case, WeWork is asking to vacate 69 leases in what it calls “largely non-operational” locations, the Dallas Business Journal reported. None of those locations are in Texas.
WeWork has leases in seven DFW buildings, including Uptown Dallas, Las Colinas and Plano. Besides that, WeWork acquired the Dallas-based coworking startup Common Desk last year. Common Desk has 13 locations in DFW and 11 others elsewhere in Texas.
DFW remains a key market for WeWork in the long term, a company spokesman told the outlet.
In Houston, WeWork has multiple locations, including one at 708 Main Street as part of the Jones on Main redevelopment project. However, that downtown location is no longer listed on WeWork’s website. Still, the company maintains its presence in the city with locations including the 609 Main building, which opened in November 2019. Its space in 609 Main spans 56,000 square feet across the 25th and 26th floors of the 48-story tower.
Houston has been a significant market for WeWork, accounting for 13.7 percent of the city’s flexible office space, according to CBRE. However, the recent bankruptcy could deliver a huge blow to an office sector that’s grappling with a record-high vacancy rate of 26 percent and a steep drop-off in leasing activity.
The impact of WeWork’s bankruptcy on the Houston market will depend on the specific locations the company decides to maintain and those it chooses to exit. Landlords in top-tier office buildings may fare better than those in lower-grade properties with higher vacancy rates.
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WeWork has six Austin locations. Two of them are in the Central Business District: 600 Congress Avenue, an iconic downtown tower, and 316 West 12th Street, which was recently purchased by Arc Capital Partners. Just south of Town Lake, it has a location at 801 Barton Springs Road.
The remaining three offices were further north — near the new University of Texas medical district, it operated out of 3300 North Interstate 35, a nondescript mid-rise office near apartment complexes. WeWork ran two locations in the Domain, one at 11801 Domain Boulevard and the other at 10900 Stonelake Boulevard, whose ownership entity traces to Goldman Sachs.
—Quinn Donoghue, Joe Lovinger and Rachel Stone