Concerns about WeWork might amplify the negative impact of a weakening economy on Singapore’s commercial real-estate investment trusts (REITs), a Credit Suisse Group AG report said.
Poor sentiment on the company could further dampen demand for coworking spaces amid slowing GDP growth, hurting office REITs, analysts led by Nicholas Teh wrote in a report.
“Office REITs have mentioned in recent briefings that corporate demand has slowed, while the narrow drivers are tech and coworking,” the analysts wrote. “There are growing market concerns around the sustainability of coworking demand, going forward.”
WeWork’s parent company, We Co, this week decided to withdraw its planned initial public offering (IPO) amid difficulties with its fundraising.
WeWork has also been rattled by the departure of Adam Neumann as chief executive and market concerns over demand.
The rental office company took another hit when its credit grade on Tuesday was cut by Fitch Ratings to reflect its “uncertain liquidity profile in the absence of its earlier plan to raise at least US$3 billion in an IPO.”
Fitch downgraded WeWork’s credit rating by two notches to “CCC+,” putting the Softbank Group Corp-backed firm deep into junk territory.
“In the absence of an IPO and associated senior secured debt raise, WeWork does not have sufficient funding to meet its growth plan,” it said.
There is a potential for WeWork’s clients, particularly big firms, to “hesitate to sign membership agreements” given the current flux, Fitch said, but added that there was no evidence of this yet.
WeWork’s rating outlook is also negative, it said.
Separately, WeWork pulled out of a deal to rent space in a Dublin office block, people familiar with the matter said.
The company had been in talks to take space at Central Quay, an office block in Dublin’s docklands controlled by Hibernia REIT, the people said.
The negotiations fell apart because of specific factors about the building, but other deals in Dublin are still going ahead, one of the people said.
“We’re committed to Dublin and excited to continue growing such a strong community here in the city,” an e-mailed statement from a WeWork spokeswoman said. “We consider many buildings in the markets in which we’re located but, of course, may not decide to proceed with all of them.’
Additional reporting by Reuters
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