Harvest Properties, a property developer based out of Oakland, is pausing a deal with WeWork for hundreds of thousands of feet of office space in downtown San Jose. The change of plans comes as REITs begin to consider WeWork a higher risk as analysts pick apart the pre-IPO company.

Investor and landlord fears surrounding WeWork ($PRIVATE:WEWORK) focus in part on the IPO, which, if unsuccessful, could force the property sharing startup to drop out of lease agreements. This, in turn, could be a disaster for those REITs and landlords who rely on WeWork for monthly revenue.

The relatively quiet pause on the part of Harvest Properties likely has other potential REITs and landlords thinking twice about working with WeWork, given the pre-IPO re-evaluation that changes — for the worst — seemingly daily.

“WeWork has got to rework its whole position in the marketplace,” Scott Rechler, CEO of RXR Realty, a New York developer and investor that has WeWork as a tenant, told The Wall Street Journal. “Because if they don’t, landlords aren’t going to be comfortable doing deals with them.”

So what is WeWork's "position in the marketplace"?

We've tracked WeWork location growth since 2017. Just two years ago, WeWork had 107 locations listed on its site. Today, that number has exploded to 904.

That impressive growth — new shared offices in exciting new markets in growing cities — is part of what fueled investors' interest in WeWork. But now, it's this number, which is viewed as a liability for a business that, so far, has failed to show a profit.

But WeWork — despite the attention given to it as of late — isn't the only business heavily dependent on tennants who pay their bills all while managing the overhead of office lease costs. IWG (formerly Regus) has been in the game longer than WeWork and, as such, operates more than 4x the number of shared office spaces worlwide. Meanwhile, other players in the space such as Knotel and Industrious are busy opening new offices of their own.

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WeWork's rapid growth and massive pre-IPO valuation (along with a still-growing list of curious details discovered in the company's S1 and surrounding CEO Adam Neumann) shed light on the office-sharing marketplace and one of the things that people — especially potential investors in WeWork — are learning is that WeWork isn't the only player in the space. A map of WeWork along with IWG, Knotel, and Industrious shows that the globe is dotted with multiple alternatives for business owners looking for a place to get to work.

Cutting overhead before it's too late

Meanwhile, WeWork is responding to market concerns by shucking overhead. In the past quarter, hiring activity as measured by job listings posted to WeWork's careers website, has dropped by more than 14% after a pervious quarter rise of 29%.

But the company remains soberly bullish on its expansion plans, telling Barron's that reports of landlords not signing new leases with it aren't accurate.

“WeWork continues to sign new lease agreements with our landlord partners,” the company told Barron’s. “We expect the pace of entering new lease agreements to slow over the next several quarters as we pursue more strategic growth and focus on accelerating our path to profitability.”

About the Data: 

Thinknum tracks companies using information they post online - jobs, social and web traffic, product sales and app ratings - and creates data sets that measure factors like hiring, revenue and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales. 

Further Reading: 

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