WeWork Rejects 440K SF Of Bay Area Leases In Bankruptcy Filing
Out of the 69 leases WeWork asked the U.S. Bankruptcy Court for the District of New Jersey to immediately reject, seven of them are in Bay Area offices, according to court filings.
The Bay Area leases WeWork has asked to reject span 440K SF. Six buildings are in San Francisco and one is in Oakland.
WeWork didn't respond to a request for comment from Bisnow Tuesday regarding the Bay Area leases.
By far the largest of the leases is for 252K SF at 430 California St. in San Francisco. The building was acquired in a joint venture between global real estate company Kennedy Wilson and the Takenaka Corp. in 2016 for $135M. WeWork entered the building in 2018, marking the largest deal of the year at that time.
WeWork also listed a 67K SF lease at 1455 Market St. in San Francisco, into which it moved in 2019. Bank of America sold the building to Hudson Pacific Properties in 2019.
The building at 222 Kearny St. that housed an 18K SF WeWork is already facing financial headwinds. Property owner GEM Realty’s loan on the two-building office complex in downtown San Francisco went into special servicing earlier this year.
At 800 Market St., WeWork leased 17.5K SF in 2018. Invesco owns the building, which was the site of an HQ by WeWork, a product that targeted midsized companies.
The now-vacant 25 Taylor St. in San Francisco was almost entirely occupied by WeWork at one point. The coworking company has since left its 42K SF and is seeking to exit the lease. The building's value is down 66% since its last acquisition by investor Scott Plank before the pandemic.
In Oakland, WeWork wants out of its lease at 1814 Franklin St. The building is owned by local firm Harvest Properties, which sued WeWork in April, alleging the firm failed to pay its $285K rent for that month.
WeWork filed for Chapter 11 bankruptcy Monday and is likely to enter a messy process as it looks to shed unprofitable locations. WeWork is one of the world’s largest private sector office occupiers. As recently as last year, it occupied 15M SF in the U.S. Its collapse will have inevitable impacts for the coworking sector and office markets across the country.
In San Francisco, the office market continues to struggle in the wake of the pandemic, one of the factors that helped bring down WeWork. San Francisco's office vacancy hit 34% in the third quarter, according to CBRE.
As WeWork goes through the restructuring process, it could try to exit more leases as it seeks to right its balance sheet. It could exit as many as 163 leases as part of its bankruptcy restructuring, about one-third of its global portfolio.
