Leaked documents from Knotel show the WeWork competitor struggled to hit financial targets well before the coronavirus hit

• WeWork competitor Knotel missed financial targets as recently as the fourth quarter of 2019, well before the coronavirus hit, according to a leaked document seen by Business Insider.
• The company's once-surging flex-space business has been hit hard by the coronavirus crisis, which has left tenants unable to occupy workspaces and prompted many to cease payments.
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Flexible-office provider Knotel struggled to hit financial targets well before the coronavirus hit, its internal financial reporting viewed by Business Insider shows.

Financial data reviewed by Business Insider shows the WeWork competitor had substantially missed sales targets as recently as the fourth quarter of 2019 and had accrued hundreds of thousands of square feet of vacant space months before the economic crisis touched off by the coronavirus began.

Knotel has said publicly that it had $350 million in annual revenue lined up at the start of 2020. According to internal documents seen by Business Insider, the company had $335 million of annual revenue signed on near the end of the fourth quarter of 2019, $80 million short of its $422 million forecast.

In New York, Knotel signed just $5.8 million in net new contracts in the fourth quarter, compared with a goal of $51.5 million. Across the 15 cities globally where the company operates, it added about $50 million of new revenue in the quarter, $50 million short of its target.

Flex-office companies generally saw a slowdown in leasing activity in the fourth quarter, per CBRE data. Much of that industry-wide decline was driven by WeWork, though Knotel's drop in leasing - 70,000 square feet of new deals in the fourth quarter, a decline of 80% from its quarterly activity over the previous year - was much more precipitous than competitor Industrious, which was down 6.5%.

The leaked financial documents also showed that Knotel had about 500,000 square feet of vacancy in its portfolio in December, a number that is projected to grow to 1.5 million square feet as it takes possession of additional spaces it has committed to lease.

Read more: Knotel is scrambling to pay millions in bills that started stacking up before the coronavirus hit, and it's late on payments to some of New York's biggest brokerages

Knotel was, until recently, one of the fastest-growing brands in the booming coworking and flex-space field, emerging as a chief competitor to WeWork.

Covid-19 has upended the soaring sector as small businesses, startups, and entrepreneurs that flooded into flexible workspaces in recent years have shed those locations or have stopped paying rent, leaving companies such as Knotel, in turn, with less cashflow to pay landlords.

Knotel has stopped paying some rent and vendors - and it has a backlog of payments that predates the coronavirus by many months, Business Insider reported.

"Given the unprecedented times we are witnessing due to the effects of Covid-19, the Knotel team is focused on balancing the interests of customers, partners, and investors, in efforts to build a sustainable, long-term business," Ivy Chiou, a spokeswoman for Knotel, said in a statement. "We are taking these steps to ensure we are well-positioned for both current times of great crisis, as well as when business returns to a new normal.

-Alex Nicoll contributed reporting.

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