What can commercial property landlords learn from WeWork’s failed IPO?
Commercial Property
WeWork's coworking model, which allows freelancers, startups and small businesses to rent space in a shared office building, brought a new market to commercial landlords and business was booming – or so it seemed. The company has lost $900m in the first six months of 2019 and poor investor reception at its IPO forced a key investor to bail the company out. But what does this mean for commercial landlords?
What it tells us about the commercial property market
WeWork has been a huge driver of demand in large urban property markets, including London. It also inspired similar companies to expand in regional markets. Its struggles are a warning that the coworking boom may have been a bubble.
Relying on coworking, and the demographic shift to large urban environments, to drive up the price and rent of office buildings is no longer viable. So we're now in the middle of a big re-evaluation of commercial property markets.
What it means for your commercial property investment
Many landlords may be directly impacted. The FT reports that they're owed a combined a total of $47bn in rent from WeWork, across the life of its leases. This is a significant sum that's at risk and contingency plans must be made.
Even if this doesn't have a direct impact on you, you may be hit by repercussions such as falling trust in coworking companies and a lack of investment. If your portfolio includes office investments in large urban spaces, you may well see a slowing in demand. We may even see more competition for tenants as landlords seek to fill their properties.
How you can protect your property
One of the first steps must be to assess your commercial property investments and the tenants that occupy them. Check-in with clients, conduct background checks and examine their finances so you can predict any problems.
There are other ways to safeguard your investment too. Commercial property insurance policies cover various causes of income loss, so check your cover. You should also know your rights when tenants are in arrears, and be prepared to exercise them. Make sure your leases allow for eviction and enforcement action when necessary.
For more advice about how to recoup unpaid debt or evict problem tenants, contact Dukes Bailiffs today.
