Three months after WeWork exited bankruptcy, landlords at hundreds of the coworking company’s former locations are scrambling to fill space it vacated. 

WeWork shrunk its footprint by 250 locations during its bankruptcy proceedings. One-third of that space was backfilled in the last year, but owners of some of the remaining two-thirds are now in trouble with their lenders. At least two former WeWork locations are in receivership, three are staring down likely foreclosures, and others are in negotiations with special servicers.

“Would you want to give a five-year loan to somebody who has a tenant that's expiring?” Anchin Real Estate Group Leader Robert Gilman said. “If you had to put all their New York City leases and line them up, some are going to fall in the bucket that they're lendable, and some are going to fall in the bucket that they're not.”

Even the landlords of some of the 600 locations WeWork is still occupying aren’t out of the woods, as the coworking firm renegotiated a slew of its leases to cut square footage and shorten lease terms, some to as little as one year.

Dig into Bisnow’s analysis of WeWork’s footprint, past and present.

— Kayla Carmicheal, Jay Rickey, Mark F. Bonner and Catie Dixon 

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On Our Radar

• Home prices hit an all-time high in June, but growth is decelerating. The S&P Case-Shiller Home Price Index released this morning says home prices rose 5.4% year-over-year in June, down from 5.9% in May. The New York City metro area led the way with a 9% increase.

• Consumer confidence is up, although Americans are increasingly worried about the labor market. The Conference Board Consumer Confidence Index rose to 103.3 in August from 101.9 in July. That is mostly thanks to a strong assessment of current conditions, as the expectations index based on consumers’ short-term economic outlook is just above 80, the threshold that usually signals a recession ahead. 

• Marijuana’s rescheduling may take longer than expected, to the chagrin of cannabis real estate. The Drug Enforcement Administration scheduled a hearing for Dec. 2 to discuss the proposal to rate cannabis as a lower-risk Class 3 substance, which likely means there won’t be traction on reclassification until 2025 — and a new president. Rescheduling the drug would be a boon to cannabis real estate, opening the door to more investment and better financing.

• More sausage = recession? Americans are eating more sausage this year, which could be an indication a downturn is on the way, according to the Dallas Federal Reserve. A growth in dinner sausage consumption often is a harbinger of a weaker economy, as consumers looking to stretch their budgets replace high-dollar meats in their meals. Catie is partial to Earl Campbell’s hot links herself, no matter the economic climate. 

• 22 days until interest rate D-Day. CME’s FedWatch tool today shows a 71.5% chance of a 25-basis-point drop and a 28.5% chance of a 50-bps drop based on interest rate trader activity. In the last 24 hours, the market has shifted back away from banking on a 50-bps reduction.

This Morning's News

RETAIL — Albertsons Will Close Stores If It Can’t Merge With Kroger (Seeking Alpha & NYT): Albertsons said it may need to close locations and cut jobs if its proposed merger with Kroger does not proceed. The companies say they need this merger to compete with Walmart, Amazon and Costco. But the FTC says the merger would adversely affect employees' pay and benefits. A combined Kroger and Albertsons would be a $200B company with 5,000 stores and represent roughly 13% of U.S. grocery sales. Dive into the implications of the potential merger and background about its lawsuit with the FTC.

HEALTHCARE — Healthcare Realty Trust Expands KKR Partnership (Healthcare Realty Trust): Healthcare Realty Trust contributed $118M of additional properties to its JV with KKR, which is nearing a $500M valuation. The duo is looking at more acquisitions. Explore more about the evolving venture.

INDUSTRIAL — Plymouth Industrial REIT And Sixth Street Form JV (Plymouth Industrial REIT): Plymouth Industrial REIT has sold a 6M SF Chicago-area industrial portfolio into a joint venture with Sixth Street. Plymouth has retained a 35% ownership stake in the portfolio and is looking to do more JV deals with Sixth Street. The move gives Plymouth $500M to pursue property purchases. Discover details about Plymouth's new game plan.

FINANCE — Debt On Pimco Office Buildings Downgraded To Lowest Junk (Bloomberg): Moody’s has downgraded $485M of debt associated with office buildings backed by Pimco to junk status, reflecting concerns over the quality and stability of the assets. The CMBS loan is the most senior debt of $1.7B of mortgages on a seven-building portfolio Pimco bought from Columbia Property Trust in 2021. Learn the state of the office buildings.

Today’s Deep Dive: Retailers Fight For Space As Sector’s Strong Performance Bucks Doomsday Forecasts

While much of CRE has been in turmoil for the last four years, retail is flourishing.

Leasing activity is at a five-year high, a scant amount of available new space is on the way, and consumer spending is on the rise. The supposed retail apocalypse of the 2010s is fading into a distant memory.

Read the full story here.

INVESTMENT — Everything Must Go: The Great £3.5B Fund Sell-Off (Bisnow): The liquidation of four major UK real estate funds is putting key assets on the sales block. Here are some of the most notable properties up for grabs.

OFFICE — OpenAI Leaves The Headquarters Where Elon Musk Paid Its Rent (Bisnow): OpenAI is vacating its HQ at 3180 Mission St. in San Francisco and putting the building up for sublease. Learn more about the building.

LEGAL — RealPage Willing To Work With DOJ (Dallas Morning News): An attorney representing RealPage expressed a willingness to work with the DOJ, which has filed a lawsuit over the firm’s rent algorithm practices. “If there are solutions here that allow us to continue innovating and competing in the market, we’re open to those solutions,” antitrust attorney Stephen Weissman said. Get the latest update about the lawsuit.

FINANCE — Failed Sale, Appraisal Delays Led To First Loss On AAA Bond Since 2008 (Reuters): The delayed ratings cut in the safest tranche of a CMBS deal for 1740 Broadway blindsided investors, sent shockwaves across financial markets and marked the first loss on a AAA-rated bond since the 2008 financial crisis. Here's how it happened.

DATA CENTERS — Data Center M&A Is Surging Again (Bisnow): M&A activity in the data center sector is experiencing a resurgence following a yearlong slowdown. This renewed interest is driven by growing demand for artificial intelligence and cloud computing services, with several major deals and investments in the pipeline. See the latest M&A deals.

OFFICE — New Neighborhoods Rise As Downtowns Struggle (Bloomberg): Aging central business districts are the focal points of commercial real estate distress, while neighborhoods miles or even blocks away are thriving. Here’s why.

OFFICE — Plans Revealed For Citadel’s Supertall Headquarters Tower (Bisnow): CEO Ken Griffin filed plans for Citadel’s new Miami headquarters, a 1,032-foot-tall tapering supertall. It will include 1.3M SF pf office space topped by a 212-room hotel. The hedge fund intends to break ground in Q3 2025. See the renderings.

PEOPLE — Former Cushman & Wakefield Baltimore Market Leader Dies At 74 (Bisnow): The commercial real estate industry mourns the loss of former Cushman & Wakefield Baltimore market leader David Gillece, who died Aug. 17. He was noted for his significant contributions to the industry, from his start in Baltimore economic development through his leadership at various brokerages since the 1990s. Learn more about Gillece's career and impact in Baltimore real estate.

RETAIL — Why 7-Eleven Is So Enticing To Circle K’s Owner (WSJ): Over 30% of Circle K stores are within a 1-mile radius of a 7-Eleven or Speedway, which have the same ownership group. This would provide the new owners cost-cutting opportunities through efforts like delivery consolidation. But the merger would also likely be scrutinized by the FTC, which would be sensitive to an increased concentration in food and fuel. Location always matters.

INDUSTRIAL — Warburg Pincus And Lendlease Acquire $1.2B Industrial Portfolio (Morningstar): Warburg Pincus and Lendlease have acquired a $1.2B industrial property portfolio in Singapore from Blackstone and Lim Chap Huat, executive chairman of Soilbuild Group Holdings. Learn more about the portfolio.

LEGAL — Wells Real Estate CEO Accused Of Real Estate Fraud (TRD): The SEC has filed fraud charges against the CEO of Wells Real Estate, alleging she and her husband misappropriated millions from investors. Here are the lawsuit's details.

RETAIL — Mattress Maker Purple To Close 2 Factories (Manufacturing Dive): Mattress manufacturer Purple Innovation is shutting down two factories in Utah and consolidating operations into a facility in Georgia. The company is also opening a new distribution center in Utah, which is where the company is based. Get the details about the factories.

LEGAL – Move Accused Of Selling 'Fake Leads' In Class Action Lawsuit (Real Estate News): Move, the parent company of realtor.com, is facing a class action lawsuit accusing the company of selling fake leads to customers. Attorneys for the plaintiffs — eight real estate agents from six states — allege Move's leads were not properly vetted or even leads at all. The National Association of Realtors is also named as a defendant. Discover more about the lawsuit.

DATA CENTERS — Meta Strikes Deal For Next-Gen Geothermal Power (The Hill): Meta has secured a deal to utilize advanced geothermal energy technology for its data centers. Deputy Energy Secretary David Turk said geothermal energy could play a role in providing zero carbon, on-demand power to an ever-more-electrified economy. The plant will be located east of the Rockies.

RETAIL — Ikea Trials Resale Website To Rival eBay (BBC): Ikea is testing a new resale website aimed at competing with eBay, which may allow the retailer to focus less on brick-and-mortar stores. Enter: Ikea Preowned.

DEI — Lowe’s Becomes Latest Company To Back Away From Diversity Efforts (Reuters): Lowe’s said it would modify its diversity initiatives, joining a growing list of companies reconsidering DEI strategies. Read more about the change.

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The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from ChatGPT. We’d love your feedback! Email us at firstdraft@bisnow.com.