Industrious Set To Take Over 1M SF Of Its Competitors' Abandoned Space This Year
Coworking operators that lease their locations are going bankrupt or giving back space as they try to survive the coronavirus pandemic, leaving landlords with suddenly unspoken-for coworking spaces in a brutal office leasing market.
Industrious — which signs management contracts to operate coworking spaces for landlords, not leases — is set to take over at least seven of those spaces across New York, Washington, D.C., Los Angeles and Chicago by June 30, including five WeWork locations, a source familiar with its plans told Bisnow.
The eight-year-old, Brooklyn-born coworking company expects to take over 30 to 40 coworking spaces nationwide, totaling an estimated 1M SF over the next 12 months, according to the source.
"We added more than 1M SF of new space last year, and some of those locations included pre-built spaces where another flex operator didn’t work out,” Industrious CEO and co-founder Jamie Hodari told Bisnow in a statement when asked about the expansion. “We’re proud to partner with landlords to improve outcomes for their spaces when there’s a good fit, and it’s clear there are increasingly more opportunities to do just that."
In Washington, WeWork is giving up space at 1875 Connecticut Ave. NW, 2221 South Clark St., 810 Seventh St. NE and 777 Sixth St. NW. In New York, the company will be shutting down operations at 261 Madison Ave., 404 Fifth Ave., 428 Broadway, 1 Little West 12th St. and 2015 East 42nd St., Bisnow confirmed. The Real Deal first reported the New York City closures.
WeWork told Bisnow in a statement Wednesday that it will also be giving up space in Chicago, Los Angeles and the Bay Area, but declined to confirm which locations it will close.
WeWork CEO Sandeep Mathrani previously said he expects the company to re-evaluate roughly 15% of its more than 800 coworking locations around the world as he sought to turn the company around from years of losses in the billions of dollars. He reaffirmed last month that the company is on track to profitability by the end of the year.
“Over the last 12 months, WeWork has continued to optimize its global real estate portfolio as a part of the company’s plan to achieve profitability,” a WeWork told Bisnow. “With an abundance of supply in our markets, we have been able to rightsize our footprint while also ensuring our members can continue to access first class flex office space.”
But WeWork isn't alone in its reckoning, and other operators have been forced into closure without the backing of SoftBank.
Flex office company Knotel filed for bankruptcy and will be taken over by Newmark, one of its investors, it announced this week, but it is unclear how many leases it will break as part of the bankruptcy restructuring.
MakeOffices, a coworking operator with locations in D.C., Philadelphia and Chicago, moved to shutter or transfer management of all of its locations last month. IWG, the world's largest operator of flex space, has declared some of its units bankrupt and reportedly threatened landlords with bankruptcy to extract concessions.
Breather filed for Chapter 11 bankruptcy in December and closed nearly 500 locations. In an interview, its CEO said of the model of a coworking company operating its own space, "I'm not sure it ever made sense."