Denver Office Market Should Be Able To Shrug Off A Potential WeWork Wind-Down
WeWork’s recent revelation of its “substantial doubts” of its ability to stay in business sent shockwaves through the business world, with commercial real estate in particular wondering what the impact could be to local office markets.
During WeWork’s second-quarter earnings call Aug. 8, interim CEO David Tolley said WeWork is working to navigate a “difficult operating environment” while also facing softer demand for its office spaces. Tolley added WeWork is “materially oversupplied” in some markets, but Denver doesn’t appear to be one of them.
According to WeWork’s website, the company has five locations in Denver: the Financial House at 205 Detroit St., the Wells Fargo Center at 1700 Lincoln St., the Tabor Center at 1200 17th St., the Circa Building at 1615 Platte St. and The Triangle Building at 1550 Wewatta St.
Specific sizes aren’t available for all of WeWork’s Denver spaces, but three of the listed locations total 300K SF. The overall Denver office market consists of 120M SF, by CBRE's count.
“WeWork’s disclosure was not a surprise for the market and simply reinforces the actions the company has been taking over the past several years to restructure its portfolio and reduce costs,” a spokesperson for JLL told Bisnow in an emailed statement.
Bisnow reached out to WeWork for comments about the company’s plans for its office space in Denver but didn't receive a reply before press time.
WeWork’s doubts about its future come as Denver’s flex office market continues to contract. Data from CBRE shows that Denver lost about 8% of its flexible office space between 2021 and 2022, the fourth-steepest decline out of the top 10 markets the firm analyzed.
Denver’s declining flex office market is following a broader market decline across the U.S. and Canada, CBRE data shows. The supply of flex office space across both markets has been steadily declining since Q1 2020 from a high of around 90M SF to just under 80M SF at the end of 2022, according to CBRE.
That decline in flex office space bucked CBRE’s projection that the market would grow during 2022 as businesses adopted new hybrid and remote work options. CBRE Managing Director Katie Kruger said at the time that flex office spaces provided employers with “a nimble way to expand and contract” while the labor market was undergoing rapid change.
Some companies have decided to require their employees to return to the office multiple days a week. Companies like Apple, Google and Redfin all require their employees to work from the office at least three days a week, Business Insider reported. BlackRock and Goldman Sachs require employees to be in the office four and five days a week, respectively.
A report from the McKinsey Global Institute in June found that office attendance has stabilized at about 30% below pre-pandemic levels, which has put additional pressures on other commercial asset classes like retail and hospitality. But in spite of its head-spinning growth in the years before the pandemic, experts don't think WeWork's demise would add too much trouble for the roiling office market.
“WeWork occupies less than 1% of global office inventory and, therefore, the company’s performance does not pose a material or systemic threat to the market,” the JLL spokesperson said.
