WeWork Rightsizing to Regain Focus

Rightsizing shows that WeWork’s turnaround starts with fixing the math of the portfolio, not with selling more desks. In this model, weak buildings drag down the whole company because lease costs stay fixed while occupancy falls. By exiting 66 low quality locations and amending roughly 150 to 200 leases, WeWork reduced long term obligations and concentrated demand into a smaller base of spaces that could fill faster and earn better margins.

• WeWork’s site economics improve sharply with maturity. Only about 30% of locations were mature in 2019, versus more than 80% for profitable peers like IWG and Servcorp. Slowing expansion and trimming weaker sites increased the share of mature buildings, which is the part of the portfolio with better occupancy and contribution margin.
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• The key issue is duration mismatch. WeWork signs long leases, often 10 to 15 years, then sells shorter memberships. Rightsizing is a direct way to reduce that mismatch by cutting expensive commitments that were signed during the growth at all costs phase.
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• This also made WeWork look more like a disciplined operator to landlords and enterprises. By 2021, the company had saved more than $200M from 200 plus lease exits and amendments, while larger customers made up a bigger share of revenue and helped stabilize occupancy across the remaining portfolio.
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The next step is turning a leaner lease book into a more durable model. If WeWork can keep pushing mix toward enterprise customers and shift more growth into management and franchise style agreements, it can rely less on signing huge leases and more on operating space that already has demand.