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WeWork’s UK rent bill tops £3bn across 3m sq ft of offices as it raises $850m for global fund

By James Buckley - Thursday, August 02, 2018 15:00

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WeWork’s total lease commitments in the UK have topped £3bn across more than 3m sq ft of office space, CoStar News can reveal, as the US co-working giant’s equity raise for its global property investment fund hits $850m.

According to leasing information pieced together from CoStar data and a third-party source which did not want to be named, WeWork’s rental commitments in the UK - predominantly in London - now stand at £3.02bn over the next 24 years, £1bn more than in October 2017 when the company's UK accounts were last published.

The data shows that WeWork is now signed up to 41 leases in the UK, totalling 3.06m sq ft of office space. The total rent amounts to around £164m per year with an average lease length of circa 18.5 years.

However, the data does not take into account any rent-free periods, for which a complete picture of verified data is opaque at best. A source said that WeWork’s actual rental commitments reflect a nominal part of the company’s overall rental obligations over the next 20 years plus. No more than 7% of its rental commitments are due in any given year, representing a manageable outlay for the company, which is seeking to raise funds at a $35bn valuation.

WeWork’s business model goes beyond a traditional subletting company. When WeWork takes a lease, not only does it claw back a meaningful chunk of the rent in incentives but it will often use its own construction company to refurbish the space to WeWork specifications. The fit out is charged to the building’s owner at a mark-up, with WeWork retaining the balance of the cost as an additional incentive.

And in an era where ‘data is the new oil’ of the digital economy, WeWork is ideally placed to harvest a goldmine of information on ‘Generation Y’ working habits, as the likes of Facebook and Amazon have done on online behaviours, to huge commercial gains.

Separate to this is WeWork’s recent move into property investment. CoStar News can reveal that WeWork Property Investors, the company’s property investment subsidiary, has now raised around $850m for a global value-add fund in partnership with private equity firm Rhone Capital. It was reported in May that the fund, which now has the firepower to build a multi-billion dollar property portfolio, had raised around $400m.

The fund is ring-fenced from the $4.4bn WeWork raised from Japan’s SoftBank last year. Until now, WeWork has only invested a maximum of 10% of the purchase price of any property from its balance sheet. As was the case with the £580m sale of Devonshire Square in the City of London in April, WeWork initially fronts the deal to the point of agreeing terms, before appointing advisers to syndicate the equity. WeWork ended up holding a 10% stake in Devonshire Square with Danish pension fund PFA Ejendomme and TH Real Estate holding 45% each.

UK accounts for 2016, published last October, showed WeWork had £2bn of lease commitments in the UK over the next 25 years.

Deals struck by the office provider suggest it is confident London will remain a hub for start-up companies after Brexit, despite profit warnings from rival firm, Regus.

US-headquartered WeWork launched in the UK in 2014 and now has 39 offices in London and two in Manchester.

The accounts stated the company has "minimum lease payments under non-cancellable operating leases" of around £1bn to 2042 in the UK, with a further £1bn of deals to 2038 that were struck after the reporting period to October 2017.

WeWork declined to comment.

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