WeWork to leave some Bay Area buildings in another blow to office market

It’s a sharp reversal to the company’s explosive growth in the past decade, which included 25 Bay Area locations and over 700 globally, making it the largest private tenant in Manhattan and one of the biggest in San Francisco. The company signed long-term office leases and rented out desks by the month to startups and later, corporate giants, but a failed initial public offering in the fall of 2019 led to thousands of layoffs. Then the coronavirus pandemic slammed the traditional workplace and froze office markets across urban centers.

“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,” WeWork said.

WeWork is also laying off four employees in San Francisco, according to a filing to California’s Employment Development Department last month.

A person familiar with WeWork’s plans who wasn’t authorized to speak publicly said the closures could include 1161 Mission St., 995 Market St., 156-160 Second St. and 25 Taylor St. in downtown San Francisco. Representatives for the building owners didn’t immediately respond to request for comment. WeWork owns 25 Taylor St. and has leased the other locations for years.

Early last year, prior to the pandemic’s arrival in the U.S., WeWork left its corporate space at Salesforce Tower and listed it for other tenants. The company said it had no updates on the space.

WeWork’s exits, combined with minimal leasing activity, will strain the local office market further by adding supply among weak demand. Vacancy has already jumped to 16.7% in San Francisco, according to brokerage Cushman Wakefield. That’s the highest since 2005.

WeWork has also closed locations in Denver, Phoenix, Washington and its original New York City location.

Co-working company Regus has also sought bankruptcy protection on more than 100 affiliate companies tied to individual buildings. Breather, which rented out rooms by the hour, also filed for bankruptcy and expects to be sold to real estate firm Newmark.

Boston Properties, San Francisco’s biggest landlord and owner of Salesforce Tower, reported a $38 million loss on rental income from co-working tenants nationally last week, as it expects tenants like WeWork to struggle to pay rent in the future.

“We’re now 11 months into this pandemic, and it’s pretty clear that the flexible space operators, customers — obviously, many of which had short-term leases, and then many of those leases are probably expired — they’ve been very slow to come back to work,” Douglas Linde, president of Boston Properties, said on an earnings call last week.

Roland Li is a San Francisco Chronicle staff writer. Email: roland.li@sfchronicle.com Twitter: @rolandlisf

Article source: https://www.sfchronicle.com/business/article/WeWork-to-leave-some-Bay-Area-buildings-in-15922613.php

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