As WeWork, a global shared office company, filed for bankruptcy protection after management difficulties, the aftermath is expected to affect real estate, finance, and tax revenues in some cities.
CNN reported on the 7th (local time) that “Experts say WeWork bankruptcy will add to the financial stress of commercial landlords who rented office buildings.” WeWork announced on the 6th that it will terminate some of its leases when it filed for bankruptcy protection in a New Jersey court.
The company, which has led the trend of the sharing economy since its establishment in 2010, once reached 47 billion dollars in corporate value. Although it was listed two years ago, it was directly hit by COVID-19 and management difficulties intensified due to unfavorable factors such as interest rate hikes. The situation has deteriorated enough to meet the delisting requirements in April this year.
The U.S. real estate market is also fluctuating due to the collapse of WeWork. In the meantime, renters who rented offices looking ahead to the future of the shared office are also in danger of taking on debt. Real estate experts said, “If vacancy increases due to WeWorkWeWork bankruptcyWeWork bankruptcy bankruptcy, rent for tenants will also decrease,” adding, “The burden on landlords struggling to pay off their debts in high interest rates could increase and lead to reduced cash.”
“In the worst-case scenario, renters may default on loans or mortgage loans,” CNN said. “This could affect the banking system, and it could hurt the city’s tax revenue (commercial property tax).” In particular, it is feared that the crisis of commercial landlords will directly lead to the burden of small and medium-sized banks. The U.S. financial sector is in a state of great difficulty due to the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank earlier this year.
Office properties already facing funding difficulties and depreciation are now facing an unexpected wave of “vacities,” Moody’s economist Ermengard Javier said in a report. Experts say WeWork’s bankruptcy will hit offices in New York, San Francisco and Boston the hardest. In New York City, tax revenue from office buildings accounts for 21% of the total.