WeWork is in talks to slash the amount of office space it had agreed to occupy in a major development in London’s Shoreditch district.
The embattled flexible-office provider and developer Cain Hoy Enterprises are considering canceling a 2017 agreement that would have seen WeWork lease two office buildings at the soon-to-be-completed Stage development, people with knowledge of the negotiations said.
Instead WeWork could occupy just the smaller of the two offices, said the people, asking not to be identified because the details aren’t public.
No final decisions have been made and the firm could still end up taking up both sites, the people added.
Representatives for WeWork parent We Co. and the Cain Hoy-led venture developing Stage declined to comment.
WeWork has been reviewing lease commitments as the company races to turn its first profit under new Chief Executive Officer Sandeep Mathrani. Landlords, investors and lenders have also become more wary of the company after its aborted initial public offering last year and the turmoil unleashed by the coronavirus outbreak.
WeWork signed a lease to rent all of the office space at the Stage project in 2017, just as work was getting underway on the development which includes the remains of a Shakespearean theater, apartments, a gym and stores.
In total it includes about 190,000 square feet (17,650 square meters) of offices, of which around 70,000 square feet is in the smaller building.
WeWork spent years reassuring landlords that it would not walk away from lease agreements, knowing that to do so would stymie its massive expansion plans and burn credibility.
But the company has become bolder in negotiating with property owners as it faces mounting pressure from the virus outbreak and a legal tussle with its majority owner SoftBank Group Corp., which has walked back part of a rescue package agreed last year.
For the Cain Hoy-led consortium behind the Stage development, the talks could also unlock the chance to find a new tenant willing to pay a higher rent than that agreed by WeWork three years earlier.
While the coronavirus poses a threat to landlords as companies review their expansion plans and long-term office needs, the amount of vacant space in the U.K. capital remains low.