WeWork has released its new strategic plan, which is meant to be its public statement of a nearly impossible turnaround. The need to cut costs is immediate. The ways to increase growth are limited, particularly by cash availability. WeWork continues to be huge, with 600 offices in 122 cities. While it will make its first cuts via discarding “noncore” businesses, it will still have too large a footprint in the temporary office business.
According to the document, WeWork’s 600 offices have 676,000 desks, which is presumably the companies prime metric for what it can rent. Its “pipeline” would take that total to 969,000 desks, mostly because of $6 billion over the past five years.
The plan to divest or close noncore businesses is evident in detail. Nothing will be left after the process beyond the “rent a desk” business, about the time the economy is about to move into recession. Since this will mean a contraction of corporate spending, WeWork faces less customer demand and an environment in which there will be a downturn in the ability to tenants to pay the prime rents WeWork charges. WeWork will contend with customers who want to break leases, just has it tries to break leases of its own with buildings in which it does not need that amount of space it planned on needing.
WeWork claims to have an annual revenue run rate of $4.2 billion. What is not clear is whether that can accelerate at the double-digit rates it has in the past. WeWork may lose much of the attractiveness as relentlessly bad press has tarnished its brand. As it cuts workers, it will be unable to provide that same services it has in the past. Potential customers may turn to their competitors with barely a thought about whether their employees view WeWork as a “great place to work” anymore.
WeWork is at the start of a turnaround, with a plan. It is a plan that very probably will not work.