WeWork's plan to double its locations baffles real estate experts - Business Insider

WeWork's new management team recently brought in branding expert Maurice Levy to shore up the company's image.Even if its new management team moves away from such extreme promotions, they still will likely rely on discounts to fill up their new office spaces. Such discounts can significantly limit the amount of revenue a new space provides.

Even assuming that WeWork can secure 600 new locations in the timeframe it's talking about — which Smith says is an open question — opening that many in that short of a time period and then trying to fill them all will be extraordinarily difficult. Given the sheer numbers of new locations, it's likely that at least some of them will be in suburban locations where WeWork to date hasn't shown that there's a demand for its service, Smith said.

But landlords usually make up those discounts and credits in the latter years of the leases with higher rent charges. And some of the rent that WeWork has deferred in the past is already about to start coming due. If what WeWork says about the profitability of its individual locations is true, "then theoretically, this level expansion doesn't preclude them from reaching profitability" by its target date, said Langbaum.

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