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Further evidence that 2019 is turning out to be the year in which tides turn in the Manchester real estate scene, this time from Deansgate.
WeWork is no longer in talks with developer Marcus Worthington for a 45K SF hub on the first four floors of a soon-to-be-completed 117K SF speculative office building, PlaceNorthWest reports.
The move, connected with concerns about the leasing structure preferred by WeWork, which involves a special purpose vehicle without a trading history rather than a direct lease with the parent enterprise, comes as landlords globally begin to push back against the space-hungry coworking giant.
Last year concerns emerged that a WeWork tenancy damages an office building's valuation, in the opinion of some investors. Research by Cushman & Wakefield revealed that investors have been discounting the cap rates of properties with a large WeWork presence.
Some of the landlord push-back arises from concerns that the coworking business model will be difficult to sustain if the economic tide turns.
“A lot of people entered our world because it was cool and sexy and there was a buzz about it, but they don’t know what they are doing and they are not making money," BE Group's BESpoke Managing Director Jonathan Weinbrenn told a Bisnow event. "When the recession comes their occupiers can just walk away. So my concern is that there will be a lot of fallout, and we may see merger and acquisition activity."
Beyond the world of real estate, earlier this month WeWork encountered disappointment when backer SoftBank offered funding several billion dollars lower than expectations.
If Manchester landlords are hardening their heart against WeWork, it will come after a serious love-in. WeWork is reported to be undeterred by the Manchester setback, and is looking at other opportunities to grow in the city. It already operates 60K SF at No.1 Spinningfields, 40K SF at One St Peter’s Square, and has agreed to take 65K SF at Dalton Place, its first entire building in the city. A further 51K SF deal with Boultbee Brooks at Moseley Street is also pending, PlaceNorthWest reported.
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