WeWork We take a look at WeWork's biggest landlords.
- Flexible office provider WeWork's top US landlords include industry giants like Blackstone and Brookfield, a slew of New York City-based firms, and itself, according to a Business Insider analysis of data from CoStar Group.
- The list along, with data from WeWork, provides one of the most comprehensive looks so far at who's leasing to the coworking company as it prepares to go public.
- With a hotly anticipated IPO on the horizon and details of WeWork's financials - and wide losses - emerging, more attention is being paid to the company and those that touch it.
- Read more of BI's WeWork coverage here.
WeWork's landlords have, so far, avoided much of the media coverage swarming around the startup.
Business Insider took a look at who's leased out the most square footage to the fast-growing, but money-losing, coworking company.
We analyzed June numbers from real estate data provider CoStar Group to understand who's renting to flexible office provider WeWork in the United States. Since its 2010 founding, WeWork has upended the staid real estate industry, shot to the top of tenant lists in cities like New York, and its valuation has ballooned to $47 billion. It's now laying the groundwork to go public.
With a hotly anticipated IPO on the horizon and details of WeWork's financials - and wide losses - emerging, more attention is being paid to the company and those that touch it.
To be sure, WeWork's landlords are keeping their total exposure to the company relatively small, though they work with competing coworking firms as well. Coworking is seen as primed for explosive growth, and large real estate companies will have to decide how much they want to work with young flex-space firms that haven't been tested through a downturn.
WeWork said there were inaccuracies in the CoStar data, but declined to provide a list of its US landlords. It did give Business Insider a list of its top 20 global landlords, but did not include square footage. That global list from WeWork contained six of the 10 names listed in CoStar's US data.
Most of the landlords on the CoStar list either did not respond to requests for comment or declined to comment.
Shayanne Gal/Business Insider
The CoStar data was dominated by private landlords. And it may stay that way, with publicly traded real estate investment trusts (REITs), which are subject to quarterly scrutiny from investors, conscious of how much they of space they want to lease to coworking companies.
"We've noticed that most REITs want to keep their coworking exposure, whether to WeWork or a peer, to under 5%," said Danny Ismail, an office analyst at research firm Green Street Advisors.
And according to CoStar data, REITs currently own 6% of US office inventory, which suggests that they are already roughly providing a fair share of WeWork's office space compared to private landlords.
Boston-based private real estate investment firm Beacon Capital was No. 1 by far on CoStar's list, and No. 2 on the global landlord list provided by WeWork.
Nuveen Real Estate is listed as the No. 2. landlord for WeWork, according to the CoStar data. The WeWork global list had "TIAA-CREF" as the No. 4 worldwide landlord. Nuveen Real Estate, formerly branded as TH Real Estate, was renamed earlier this year and is the investment management arm of TIAA. (TIAA did its own rebranding in 2016, switching from TIAA-CREF.)
Blackstone is WeWork's No. 7 US landlord according to the CoStar data, renting more than 300,000 square feet to the flexible office provider. WeWork is still just a drop in the bucket for Blackstone, the world's largest alternative investment manager, representing less than 1% of the firm's vast office portfolio.
Some of the top WeWork landlords, like Blackstone and Brookfield Properties (No. 5 on the US list), have also invested in or leased spaces to other co-working companies.
The We Company, WeWork's parent, takes eighth place in the US, according to the CoStar data. The We Company did not appear on WeWork's own list of top 20 landlords globally.
Boston Properties was the only publicly traded real estate investment trust that cracked the top 20 US landlords, according to CoStar. But a large development in the Brooklyn Navy Yard will likely push the REIT up the US list. Boston Properties was No. 10 on WeWork's list of the top global landlords.
WeWork had 485 locations at the end of the first quarter, up from 127 just two years ago, with no signs of slowing growth. The company, which is focusing on partnering more and more with big firms in addition to startups and entrepreneurs, lost almost $2 billion in 2018. Its international business was more than 40% of revenue by the second half of 2018, up from 28% in the first quarter of 2017.
Real estate services firm Jones Lang LaSalle projects that by 2030 30% of US office space will be controlled by flexible working providers, including executive office suites, co-working setups and incubators, up from 5% now.
The We Company is also working to buy up more of its own real estate. With a $1 billion infusion from Ivanhoe Cambridge, a real estate company whose parent is Canadian pension fund Caisse de depot et placement du Quebec, it set up a $2.9 billion fund earlier this year to buy buildings that WeWork will lease.
Buildings that the fund is purchasing include ones WeWork CEO Adam Neumann had purchased and subsequently leased out to the company.
Limited exposure
No landlord with more than 10 million square feet of US office space currently leases more than 5% of its square footage to WeWork, per CoStar data. With those numbers, a CoStar analyst said no major US landlord risks over-exposure to the company, for now.
WeWork leases under separate subsidiaries, so if the company were unable to fill the space, the subsidiary can file for bankruptcy and protect WeWork while cancelling the lease. WeWork is still on the hook for a guaranteed six months to a year of lease payments, but they're protected from the full cost of a 15-year lease, according to media reports.
Ismail at Green Street Advisors noted that flexible office providers usually have more people per square foot than traditional office space, where employees might work in cubicles and offices rather than in open floor plans. Coworking floors can stress shared facilities like elevators and potentially lower a building's value to traditional tenants.
On top of those challenges, landlords are conscious of the mismatch between long leases and WeWork's short-term rentals to its own customers.
RXR Realty, a privately held real estate company focused in the New York City area, holds the tenth spot on the US landlord list according to CoStar's data.
"There are lots of small users working together in businesses that may not have the capacity to weather a downturn," RXR' chief executive and chairman Scott Rechler said, referring to startups and entrepreneurs that rent coworking spaces.
Still, some private firms have also invested in WeWork's competitors or developed their own coworking services. Brookfield, in fifth place on CoStar's list and the No. 3 spot on the global list, is also an investor in co-working firm Convene, which was founded in 2009 and has 25 locations in 5 cities.
"We are one of the largest property owners in the world," a Brookfield representative said in a statement. "Responding to our tenants' desires for flexibility is important, so we lease to a number of flexible space providers in addition to Convene, as well as provide our own offering where it makes sense."
Cohen Brothers Realty Corporation was No. 4 on the US list and No. 19 on WeWork's list. CIM Group came in ninth on the US list and 17th on WeWork's global list.
Are you a WeWork employee with a story to share? Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at mmorris@businessinsider.com, or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.