Bankrupt co-working giant WeWork is keeping eight of its nine Chicago locations after finalizing lease renegotiations during its ongoing Chapter 11 reorganization.
The one casualty, a Fulton Market co-working space, is set to stay open, however, under a new banner: Chicago-based startup Workbox.
WeWork will give up one of its two Fulton Market locations at 220 N. Green St. in June as part of the restructuring of its portfolio, shedding more than 100 leases and reducing its rent commitments by $11 billion globally, the company said.
“During Chapter 11, we made the difficult decision to end our operations at 220 N. Green Street,” a WeWork spokesperson said in an email. “All impacted members have been previously notified and offered relocation assistance to other locations where possible.”
Reducing its rent obligations has been a key part of the reorganization process since WeWork filed for bankruptcy protection in November. A confirmation hearing to approve the reorganization plan is scheduled for May 30 in a New Jersey bankruptcy court, with WeWork likely to emerge from Chapter 11 in June.
The reorganized WeWork is expected to operate more than 170 locations across the United States and Canada and 337 locations globally, a substantially downsized portfolio.
Meanwhile, Workbox is jumping in to fill part of the void, signing a long-term lease on WeWork’s six-floor, 60,000-square-foot Fulton Market space, with plans to keep the doors open during the handoff. It will be the third and largest discarded WeWork location to make the transition to Workbox.
“The strategy is to make it as seamless as possible for the existing member base in the building,” John Wallace, 44, CEO and co-founder of Workbox, said Tuesday. “We’ve done this several times before and our goal is to minimize the amount of disruption.”
Founded in 2019, Workbox has five Chicago locations, along with standalone outposts in Columbus, Ohio; Minneapolis; Salt Lake City and Dallas, which opened Monday in another former WeWork space.
Workbox previously grabbed the space at 125 S. Clark St. in the Loop, which WeWork vacated in November. The co-working space reopened in January as the first WeWork-to-Workbox transition.
The Fulton Market WeWork is expected to become the largest Workbox location in June.
WeWork opened the co-working space at 220 N. Green St. in 2015. But it may have become expendable after opening a second Fulton Market location at 167 N. Green St. in May 2022.
Wallace said WeWork members will be able to keep utilizing the 220 N. Green St. location at comparable rates when Workbox takes over.
While the space and rates will remain essentially the same, the mission is somewhat different, Wallace said. In addition to co-working space, Workbox offers an accelerator and an investment arm to boost startups.
“We really go after small early and growth stage businesses,” Wallace said. “We provide office space just like our peers do, but we also have a venture fund, an accelerator and do a lot of programming revolving around building businesses.”
Launched in 2010, WeWork became the poster child for the co-working boom and bust. A planned initial public offering imploded in September 2019 amid concerns about corporate governance and the path to profitability. Co-founder Adam Neumann was ousted and the company was taken over by SoftBank, whose previous investment had pushed WeWork’s valuation to $47 billion.
Then the pandemic hit, and the company spiraled into bankruptcy under the weight of its massive lease obligations.
But as WeWork looks to emerge from bankruptcy with a downsized portfolio, there are signs the co-working market is evolving and recovering in the hybrid post-pandemic office landscape.
During the first quarter, the number of co-working spaces in the Chicago market increased by 2.6% to 235 locations, according to a report from co-working booking service CoworkingCafe. At the same time, the Chicago market lost 3% of its co-working square footage, which now stands at 6.1 million square feet.
Chicago hit a new post-pandemic high with office building occupancy reaching 71% of pre-pandemic levels last Tuesday, according to the latest report by Kastle Systems. Overall, Chicago office buildings averaged 56% of pre-pandemic occupancy levels throughout the week.
Workbox is confident that demand for WeWork’s vacated Fulton Market space will be strong.
“We’re seeing a lot of demand on the back end of this new hybrid working world,” Wallace said. “Even larger companies are looking to have more flexibility in their real estate.”
rchannick@chicagotribune.com