Coronavirus-fueled uncertainty could accelerate consolidation of flexible office spaces – ET RealEstate

BENGALURU: The flexible office space is expected to undergo a major consolidation phase with uncertainty looming large on the segment due to the Covid-19 pandemic and a resultant demand slump.

While a large operator like RMZ is exiting the business, global major WeWork plans to expand as per client specifications only for some time. Awfis and Smartworks have also slowed down the pace of expansion as they continue to study the evolving market dynamics.

“We will grow as per our client requirement and focus on opportunistic expansion rather than speculative,” said Karan Virwani, CEO at WeWork.

Though consolidation within co-working space started in 2018 with major acquisitions like One Co.Work acquiring IShareSpace and AltF CoWorking acquiring Noida-based Daftar India, Covid-19 will accelerate the process as weak players will be weeded out, say experts.

The period of low occupancy with increased operational costs is making multiple small players unviable. “There will be huge consolidation in the co-working space as managing cash flows will become difficult. We are onboarding clients and offering rental waiver till they occupy the facility,” said Neetish Sarda, cofounder of Smartworks.

The pandemic has hurt small co-working space operators with around 3.2 million sq ft of flexible office space expected to be vacated this year, according to a study by Knight Frank India. “We expect larger players with a greater weightage of enterprise tenants to endure, while those with tenant profiles predominated by MSMEs and startups are expected to shut businesses,” said Shishir Baijal, chairman, Knight Frank India.



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WeWork appoints Benjamin Dunham as CFO – ET RealEstate

BENGALURU: Office-sharing startup WeWork on Wednesday appointed Benjamin Dunham as its chief financial officer, replacing Kimberly Ross.

Dunham, most recently the finance head of WeWork Americas, will assume office on Oct. 1, the company said.

Ross, who joined the firm in March as part of a broader top management overhaul being undertaken by Chairman Marcelo Claure, is stepping down owing to personal reasons, WeWork said.

Last month, WeWork said it had slashed its cash burn rate almost in half from the end of last year and obtained a $1.1 billion commitment in new financing from SoftBank.

The company shelved its initial public offering in 2019 after investors grew wary of its losses, business model and corporate governance, further leading to the resignation of co-founder and former chief executive officer Adam Neumann.

WeWork has since undergone an enormous management shake-up and remains enmeshed in lawsuits over a $3 billion tender offer to existing shareholders.



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WeWork gets new $1.1 billion commitment from SoftBank – ET RealEstate

NEW YORK: The owner of money-losing shared office provider WeWork told employees on Thursday it has slashed its cash burn rate almost in half from the end of last year and obtained a $1.1 billion commitment in new financing from majority owner SoftBank Group Corp.

The company said in an e-mail to employees that its second-quarter results show the coronavirus pandemic has hurt business but its financial position remains strong.

“Our early efforts to become a more streamlined, cash-conscious organization puts us in a better position to adapt quickly, navigate new realities and deliver our future business objectives,” said Kimberly Ross, chief financial officer of WeWork, in the e-mail seen by Reuters.

Revenue in the quarter reached $882 million, a 9% increase from a year earlier, Ross said. WeWork in the first quarter reported revenue of $1.1 billion, the first time it had exceeded nine figures, and its cash burn was $482 million.

WeWork has $4.1 billion in cash and unfunded cash commitments, including the $1.1 billion in new financing, Ross said. WeWork in July indicated it expected to be cash flow positive in 2021, according to the Financial Times.

The $1.1 billion is the last of the debt facilities included in a wide-ranging transaction announced in October 2019, a source at SoftBank said.

WeWork ended the quarter with 612,000 members, a decline from 693,000 in the prior quarter. But 48% were from prized “Enterprise” customers, businesses with 500 employees or more.

The results were released almost a year to the day after it filed plans to go public, when the company was valued at $47 billion and looked poised to be one of the year’s hottest IPOs.

WeWork soon entered a tailspin as revelations of corporate mismanagement emerged. The company has since undergone an enormous management shake-up and remains enmeshed in lawsuits over a $3 billion tender offer to existing shareholders.



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Netflix leases 8,860 sq ft office space from WeWork in Mumbai – ET RealEstate

BENGALURU | MUMBAI: Online video streaming platform Netflix has signed a flexible workspace deal for an entire floor at WeWork’s Nesco coworking centre in Goregaon, Mumbai.

The transaction for 8,860 square feet, for about 320 seats, was signed on June 30, people aware of the deal said.

It will be used to execute visual effects work – which is seeing increased demand in the country — along with another company, Anibrain.

“The deal tenure is two plus one year with a lock-in period of 18 months. The employees operating out of Nesco complex will exclusively be aligned for Netflix work,” the people said, without disclosing its financial terms.

The WeWork Nesco IT Park in Mumbai spans eight floors with total seating capacity of 3,400 spread across 228,000 sq. ft.

This is the third large deal for WeWork this year.

Earlier this year, the flexible spaces operator signed a large deal with Commonwealth Bank of Australia and China’s ByteDance, across Bangalore and Mumbai.

Netflix and WeWork refused to comment.

Anibrain also has offices in Pune and the Andheri suburb in Mumbai, with around 700 employees catering to global clients and has worked on global projects like The Secret Garden, The Aeronauts and The Witcher.

“India is a very important centre of production globally. Most content creation happens out of countries like the United States, Japan and India,” said a second person aware of the deal.

India has emerged as a crucial content hub for Netflix, which has announced around 50 original series and films in the country.

Netflix took around 1,37,000 sq ft in Godrej Bandra-Kurla Complex in January last year to expand its presence.

“Once the lockdown is lifted, it may take another two months for the Godrej property to go live. Netflix will also move from the existing co-working properties,” another person who is aware of the deal said.

Netflix already has a flexible workspace with around 100 seats at The Executive Center at Maker Maxity in the BKC and a 9,000 sq ft separate office in the same complex.



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