Poor sentiment on the company could dampen demand for co-working spaces amidst slowing gross domestic product growth, in turn hurting office Reits.

Concerns surrounding WeWork may aggravate the negative impact of a weakening economy on the commercial real estate investment trusts (Reits) of Singapore, reported Bloomberg citing Credit Suisse Group.

Analysts led by Nicholas Teh expressed in a report that poor sentiment on the company could dampen demand for co-working spaces amidst slowing gross domestic product growth, in turn hurting office Reits.

“Office Reits have mentioned in recent briefings that corporate demand has slowed, while the narrow drivers are tech and co-working. There are growing market concerns around the sustainability of co-working demand, going forward,” the analysts said.

WeWork withdrew this week its planned initial public offering as it faced difficulties with its fundraising. The company has also been shaken up by market concerns over demand and the departure of its chief executive officer.

Credit Suisse said the impact may differ depending on the client. While WeWork’s losses have risen, JustGroup’s financials reveal the company is closer to profitability and IWG has already broken even.

“We note that profitability across operators can vary substantially and, for now, believe concerns would be about the sustainability of WeWork’s leases, rather than significant consolidation in the industry as a whole,” said the report.

WeWork is the leader among flexible work space operators in Singapore, which has seen the number of co-working spaces triple since 2015, according to Colliers research.

Source: CommercialGuru, 3 October 2019