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03 October 2019

WeWork concerns seep into Singapore’s real estate sector

WeWork withdrew its planned initial public offering this week amid difficulties with its fundraising and the company has also been rattled by the departure of its chief executive officer and market concerns over demand.


Credit Suisse Group said that concerns about WeWork may amplify the negative impact of a weakening economy on Singapore’s commercial real estate investment trusts, reported Bloomberg.

In a report, Credit Suisse analysts stated that poor sentiment on the company could further damp demand for co-working spaces amid slowing gross domestic product growth, 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,” said Credit Suisse.

The New York-based firm is the leading player among flexible workspace operators in Singapore, which has seen such facilities triple since 2015, added Credit Suisse. Together with other major players such as IWG and JustGroup Holdings, WeWork has contributed to co-working space being a key demand-driver for REITs in the city-state.

CapitaLand Commercial Trust currently has the highest exposure to co-working spaces, amounting to about seven per cent of its portfolio. The company’s spokesperson said that there have been no changes to a binding seven-year lease agreement with WeWork for a central business district property, commencing in the second quarter of 2021.

Credit Suisse noted that the impact may vary depending on the client. While WeWork’s losses have mounted, JustGroup’s financials show the company is closer to profitability and IWG has already broken even, the analysts noted.

“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,” Credit Suisse noted.



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