WeWork plans to keep adding shared-office locations in Toronto even as it slows expansion around the world in order to stem its losses.
The New York-based company, which leases office space for upward of 10 years and then subleases it at a premium for short periods, has expanded to more than 500 locations in about 100 cities in less than a decade.
Now, those ambitions are being scaled back, according to the company, after WeWork was unable to raise much-needed funds from an initial public offering.
“WeWork continues to sign new lease agreements with our landlord partners," the company said in an e-mailed statement. "We expect the pace of entering new lease agreements to slow over the next several quarters as we pursue more strategic growth and focus on accelerating our path to profitability.”
The company is racing to restructure under new leadership. This week, it replaced its chief executive, co-founder Adam Neumann, with two company insiders.
WeWork has never been profitable. In the first half of this year, the company lost US$900-million on revenue of US$1.54-billion, according to its securities filings.
Although WeWork is slowing down its expansion, it told one Toronto property owner, Dream Unlimited, that the city was a priority.
“We are continuing to work with them on projects we have on the go,” said Michael Cooper, the CEO with Dream, which is leasing one of its downtown Toronto office buildings to WeWork and is in the middle of renovations.
Toronto has been one of WeWork’s fastest-growing markets. It now has 10 locations, up from one in 2017. A WeWork’s general manager has repeatedly said he expected the company to reach 20 locations in Toronto by next year.
However, it may find it increasingly difficult to find space in the city. Toronto has had the lowest office vacancy rate in Canada and the U.S. since early 2016, according to data from commercial realtor CBRE Group Inc.
Vancouver’s rate recently dropped to 2.6 per cent – matching Toronto as the tightest market in North America, according to CBRE.
In addition to traditional tenants, WeWork will be competing with more co-working providers such as iQ Office Suites and IWG Plc’s Spaces.
WeWork’s plans for other Canadian cities are not known. It currently has seven locations in Vancouver, four in Montreal and two in Calgary.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.