WeWork Bets on Corporate Office Tenants in New Lease
In a new lease agreement, the co-working firm is hearkening to a new wave of tenants that steps away from solo entrepreneurs and start-ups.
NEW YORK CITY- WeWork has leased a thick slice of 437 Madison Ave., a 40-story trophy office property in the Plaza District for an anti-type to its familiar tenant. The transaction comes amid steep changes from the co-working firm that has begun to downsize its workforce, halt its leasing and withdrew its initial public offering prospectus this week.
Hearkening to an emerging wave of new co-working tenants that beckon themselves as “enterprise users,” –another description for corporate firms and large companies – WeWork will occupy 362,197 square feet of the 850,000 square-foot-tower to cater to the tenant type. The move is a step away from its usual suspects of solo entrepreneurs and start-ups.
Enterprise users are expected to plump cash flows as the economy potentially slows, and co-working firms are branching out to appeal to the rising flock.
These corporate firms drove a majority of the 2019 leasing growth. Flex office square footage has tripled since 2014, amassing 15 million square feet as of Q1 2019 and growing 9.5% since year-end 2018, according to data from CBRE.
Sage Realty Corporation, a property management division of the William Kaufman Organization, finalized the lease with WeWork for a 12-floor block of space 15 months ahead of its lease expiration with existing tenants, and is confident in the company’s fresh business proposition.
“After having a strong relationship with one long-term tenant for many years, we look forward to starting a new one with WeWork,” said Jonathan Kaufman Iger, CEO of Sage Realty Corporation, in a prepared statement. “We look forward to WeWork establishing an offering that will appeal to their enterprise members.”
In the 98% occupied building, WeWork will begin its operations on floors 2-12, and an allotment of the 14th floor on Jan. 1, 2021. The firm will have a private entrance on 50th Street , and its own outdoor terrace on the 15th floor, accessible through a private staircase.
The mid-century building underwent a $60 million renovation in 2015, transforming the asset into a contemporary office environment. Amenities that are expected to draw the high-tier tenants include a re-designed lobby, arcade, a new plaza, renovated elevators, upgraded building systems, and an outdoor terrace with views of St. Patrick’s Cathedral.
“This transaction demonstrates how well the repositioning at the building has been received and the level of investment we have committed to this property,” said Michael Lenchner, vice president and director of leasing at Sage Realty Corporation.
Sage Realty views the lease with WeWork as a slam dunk, as it joins several other blue-chip tenants at the property, including reinsurer Munich American Reassurance Company, financial services firm Citizens Bank, and philanthropic organization Carnegie Corporation of New York.