WeWork Australia gets $110m cash boost from parent

WeWork Australia has received a $110 million equity injection from its parent as it navigates through the coronavirus-caused slowdown into what it hopes will be an uplift in flexible working on the other side.

The Australian arm of the co-working giant issued 110 million shares to its Amsterdam-based parent, WeWork Companies, at $1 each, earlier this month, according to company filings lodged with the corporate regulator.

WeWork Australia, which declined to comment on the big cash bump, has pressed ahead opening new hubs this year after some delays and despite sharp falls in foot traffic at its facilities during the height of the COVID-19 outbreak.

The cash injection comes after the Australian business warned its 2020 earnings would be hit by the pandemic although it has been assured its parent company will step in to help meet working capital obligations if needed, according to its most recent financial report.

While co-working locally and around the globe suffered initially as office staff shifted to working from home en masse during the COVID-19 crisis, some analysts have predicted increased use of flexible workspaces over the medium-term as major corporates dial back their occupancies in response to economic uncertainty.

WeWork lists 21 venues on its Australian website, including a Brisbane hub which is opening soon.

At the height of the pandemic, footfall across WeWork's Australian locations slumped to just 5 per cent. By early July, as restrictions were easing, it had reached 80 per cent of normal traffic in Brisbane. At the same time in Sydney footfall was still only about 25 per cent to 30 per cent of its usual rate.

"There is an incredible amount of demand coming in around September for large requirements," WeWork's general manager for Australia and New Zealand, Balder Tol, told The Australian Financial Review at the start of July.

"Enterprise organisations have obviously looked at their densities and really want to bring back their employee workforce but might not have the total commercial office space available to accommodate all of their employees."

Although WeWork's previously rapid expansion globally and in Australia has slowed since it abandoned a highly anticipated float last year, revenue in its local arm nevertheless increased significantly over 2019.

Expenses also rose, multiplying its after-tax loss nearly six-fold to $42.6 million. Related party loans rose past $144 million while its operating lease commitments tipped past $920 million at the start of 2019.

Morgan Stanley analysts have predicted that as corporate tenants reduce their permanent footprints they will meet any additional demand through flexible workspaces.

"Despite a recent slowdown in growth, we agree that demand for flex space could re-accelerate in the next few years in the wake of the pandemic," they wrote in late July in a major piece of research on regional office markets.

"Tougher business conditions amid a softer macroeconomic outlook have made it more difficult for companies to have certainty on their expansion plans and office needs.

"The evolving business environment, given travel restrictions and a shift to more remote working, further compounds this problem.

"Taking flex space may be a viable solution because the shorter leases and lower capex commitment mean that any decisions could be more easily reversed or changed to adapt to changing conditions."