WeWork Joint Venture Buys City Of London Building For £580m

WeWork, the co-working group, has made its largest property acquisition to date after joining up with two investors to buy a 13-building campus in the City of London.

WeWork agreed a three-way partnership to acquire Devonshire Square outright for about £580 million.

The eight-year-old company joined PFA Ejendomme, Denmark’s biggest commercial pension fund, and TH Real Estate, a property investment managers, to buy the 620,000 sq ft site from Blackstone, which bought the complex for just under £340 million in 2012.

Richard Gomel, a senior executive at WeWork, described the five-acre Devonshire Square as “a transformational and iconic asset” for the company and said that it had “tremendous potential”.

WeWork, which is based in New York and is valued at $20 billion, provides small offices or communal co-working spaces on flexible leases that can range from one day to a year.

The company has made London a key part of its growth strategy, having become the largest occupier of office space in the capital last year, after the government. The expansion at Devonshire Square will take its London footprint to 2.9 million sq ft.

WeWork already has a presence in Devonshire Square, having occupied about 20,000 sq ft at number 9 since 2015.

WeWork will expand into numbers 8 and 10 Devonshire Square to increase its co-working space at the campus, making a total of 200,000 sq ft, according to The Times.

The site, which is the size of four football pitches, is home to restaurants, offices and the Devonshire private members’ club. It is near Liverpool Street Station and includes some buildings which were originally East India Company warehouses.

Nick Deacon, head of European offices at TH Real Estate, said the acquisition represents a unique opportunity to acquire a high-quality, multi-let asset which is well suited to shared office concepts.

“Conceptually we back WeWork — they are the company that is gaining market share, they are the number one occupier in London and you can’t ignore that,” he added. “We want to participate in that success.”

The acquisition is the latest in a series of expansion moves across the capital for WeWork as demand for flexible co-working spaces soars.

WeWork recently launched its own UK education offering in association with coding school Flatiron. The programming courses, run from the Finsbury Pavement WeWork, offer £1 million in scholarships to help underrepresented groups get into coding.

It emerged last month that the company was considering moving into Debenhams on Oxford Street as the retailer looked to make better use of floorspace.

WeWork’s other most significant property acquisition was also completed through a partnership structure — in October, the co-working giant bought the 650,000 sq ft Lord & Taylor department store in Manhattan for $850 million (£592 million) in a joint venture with Rhône Capital.

According to Bisnow, rather than conventional leases where the company pays a fixed rent with periodic reviews, the joint venture has put in place revenue sharing leases, where WeWork pays a certain proportion of the revenue from the space it occupies.

Revenue leases, sometimes called turnover leases, are common in retail but rare in the office sector.

DealMakerz isn’t surprised by WeWork’s expansion, given the huge rise in co-working among Londoners.

Figures from Cushman & Wakefield show Central London saw 2.5 million sq ft leased to flexible workspace providers in 2017 – a 190% increase on the year before and comprising more than 21% of all commercial office leases in the capital.

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