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WeWork overhauls leasing model as French advertising mogul takes interim role

Finance and Securities, NYC, Other, Real Estate Developments

Maurice Lévy, chairman of Publicis—the world’s third largest ad agency—has assumed an interim role as chief marketing officer of WeWork as the firm unveiled a transformed business model this week. Lévy, who described the new role as an “interesting and fun” challenge as the struggling office business deals with the fallout from this fall’s catastrophic IPO and the departure of founder Adam Neumann. As was widely expected, WeWork has either terminated or outsourced approximately 4400 of its employees—nearly a third of its workforce. The firm is also repricing its share options in a bid to retain staff whose incentives were developed prior to the collapse in WeWork’s valuation. [1]

Perhaps more notably, WeWork also announced that it will no longer sign long-term leases outside of its approximately 12 “core markets” which include New York and London. This represents an enormous reversal for a company that celebrated opening in its 100th city earlier this year. Going forward, WeWork stated it will continue to manage properties on behalf of landlords in other cities while eschewing the high-risk strategy of long-term leases outside of the most prime office locations. WeWork expects these changes to create a pathway to profitability by 2021, although the firm remains locked into hundreds of leases worldwide, with 300 opened in the last year alone. Although SoftBank appears committed to its rescue plan for the company, the shift in WeWork’s model also raises profound questions for the viability of its rivals in the shared workspace market, although none appear to have followed a growth path as risky as the one pushed by WeWork’s ouseted CEO. [2]

[1] Barker, A. (November 2019) Maurice Lévy prepares for daunting task in new role at WeWork from FT Accessed November 25 2019

[2] Platt, E. WeWork to ditch leasing model in many cities from FT Accessed November 25 2019

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