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WeWork's Birmingham Plan: Is Three A Lucky Number?

WeWork's Number Two Birmingham Base, Louisa Rylands House, Newhall Street

WeWork’s problems are well advertised. An unsustainable valuation, an ill-advised IPO and a cashflow crisis have left the coworking sector’s most famous name looking damaged.

The firm’s rapid expansion appears to be on check, with reports that four London office deals, together with a fifth deal in Glasgow, have come to grief. Together these presumed WeWork lettings add up to 225K SF, with a further 350K SF at risk at a sixth London location on Fleet Street, Property Week reported.

Glasgow, one of WeWork’s three UK regional adventures, has been particularly hard hit. Not only did an 80K SF deal at Atlantic Quay come to grief, but weeks earlier a 77K SF signing at 50 Bothwell St. ended with the landlord FORE Partnership backing out.

Will the other regional centres suffer in the same way? WeWork’s Manchester operation is the longest established outside London and has some major tenants to its name (Amazon among them), so is probably safe. But Birmingham, still in its early days, is a different story.

So far WeWork’s expansion into Birmingham has looked solid.

The fit-out is complete at the 55K SF 55 Colmore Row hub taken by WeWork in late May.

Colmore Row was WeWork’s debut letting in the city and came after 18 months of will-they won’t-they speculation about locations and timing. WeWork swooped on a block that underwent a £30M redevelopment in 2015. Top rents in the city hover around £34 per SF, and WeWork is understood to have paid close to this level. The original plan was for WeWork's fit-out to commence in June, with a target opening date of Q4 2019, which has been achieved. Target prices are £500 per desk per month.

Having completed its task at Colmore Row, WeWork’s fit-out team have now moved on to their third Birmingham acquisition: the 97K SF let by Hines at Six Brindleyplace in June 2019. Bisnow reported then that the plan was for refurbishment to begin immediately with the hub open for business in early 2020. Letting agents now say they expect the scheme to be functioning in February, which suggest a project that is still on schedule. Target prices here are a little lower than Colmore Row at £450 per desk per month.

“I’ve seen the fit-out at 55 Colmore Row and I left encouraged,” Avison Young Birmingham Office Agency Head Charles Toogood told Bisnow. Avison Young and Savils are joint agents for Hines at Six Brindleyplace.

“The construction team is now moving on to Six Brindleyplace and they are a few months behind, and we’re not worried,” Toogood said.

If there is a question mark it hangs over WeWork’s second Birmingham acquisition: the 81K SF block at Louisa Rylands House.

A deal was agreed with landlord Euro Property Investments Limited in June 2019, amidst expectations that it would be open for business in spring 2020. That expectation now seems unlikely to be fulfilled, given WeWork’s current Birmingham workload, with a target date of Q4 2020 now being discussed.

Former WeWork CEO and co-founder Adam Neumann

Louisa Ryland House was never going to be an easy task for WeWork. The block was being promoted as an aparthotel or hotel venue as recently as last year. Of the three Wework signings in Birmingham, this is regarded as the more complicated refurbishment project, and as a result more expensive for a business with plenty of reasons to watch its cash flow.

"The project progress is proceeding in line with dates in the signed agreement for lease with We Work," Euro Property Investments Development Director Mark Hackett told Bisnow.

WeWork did not respond to Bisnow's invitation to comment.

At the time of the Brindleyplace deal, WeWork was upbeat about further Birmingham deals.

"We continue to work with WeWork in the city and are actively progressing further acquisitions, which will create more great locations for its members to enjoy," JLL Director of Tenant Representation Kelvin Craddock said in June.

Landlords with completed WeWork fit-outs can afford to take a relaxed view: The space could become an in-house coworking operation without too much difficulty, and perhaps with much profit.

For other landlords, who have more recent talks with WeWork, the situation is less stable. Fitted out or not, whether there will be more WeWork hubs in Birmingham remains an open question.

UPDATED October 6, 5.34 AM ET: To include comment from Euro Property Investments.