WeWork, the US firm that pioneered the coworking office-spaces trend, sought bankruptcy protection in the US on Monday, marking a spectacular rise — and fall — of a firm that revolutionized flexible working in the last decade.

The Japanese SoftBank Group-backed startup, which rented sleek shared office spaces to startups and freelancers, said the move was part of a "comprehensive reorganization" to shore up its finances.

The bankruptcy caps years of troubles at the debt-ridden firm that posted huge losses on the billions of dollars it spent aggressively on leasing shared office spaces in locations such as San Fransisco, Tel Aviv and London.

WeWork said about 92% of the company's lenders had agreed to a restructuring plan that would see them convert their secured debt into equity. The debt conversion would wipe out about $3 billion (€2.8 billion) of debt from its debt pile of more than $18 billion, news agency Reuters reported. The plan will also help WeWork reduce its portfolio of office leases.

"As part of today's filing, WeWork is requesting the ability to reject the leases of certain locations, which are largely nonoperational, and all affected members have received advanced notice," the company said in a statement.

The company currently leases millions of square feet of office space in about 700 locations in dozens of countries, including Germany.

The bankruptcy will only affect WeWork's business in the US and Canada.

WeWork's fall from grace

Not long ago, WeWork — co-founded by Adam Neumann — was a darling of investors, attracting backing from the likes of SoftBank and JPMorgan Chase, and growing to become the most valuable US startup worth $47 billion.

The company pursued breakneck expansion, even while burning massive amounts of cash, becoming a coworking leader offering spaces where different teams, companies and individuals could work together and share facilities and services.

In need of cash, the company planned to go public in 2019. However, the initial public offering was shelved amid governance issues at the firm and poor financials, leading to Neumann's ouster.

SoftBank came to WeWork's rescue and took it public at an $8 billion valuation. But then the COVID-19 pandemic added to the firm's troubles, hitting demand for shared office spaces as many workers were forced to work from home.

WeWork's prospects further dimmed as a global economic slowdown and high inflation prompted many of its startup customers to close their doors.

WeWork's valuation has tanked from its previous highs with the company valued at less than $45 million as of Friday.

Former CEO Neumann said WeWork's bankruptcy filing was "disappointing."

"It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before," Neumann said in a statement to CNBC.

What about the coworking space industry?

WeWork's bankruptcy filing comes as leasing demand for office space remains weak overall. Even as companies are increasingly insisting people return to the office, at least partially, vacancies in office space remain high.

Tobias Kollewe, president of Germany's Federal Association of Coworking Spaces (BVCS), says WeWork is a clear case of mismanagement. It cannot be down to the situation in the industry.

"Coworking is a success story," Kollewe told DW.

Industry surveys show an improvement in the demand for short-term office rentals as firms warm up to the reality of hybrid working.

A June survey of European companies by CBRE, a global commercial real estate services & investment company, showed that "appetite for flex space continues to rise," with some firms prepared to consider higher allocations of flex office space than has been the case in the past.

Earlier this year, research firm Market Reports World put the size of the coworking space market at $14 billion and forecast it to grow at a compound annual growth rate of more than 17% until 2028.

Mark Dixon, founder of WeWork's rival IWG said hybrid work was accelerating the company's growth around the world.

"Today, we are continuing to witness the unprecedented rise of the Great Lease Resignation. Businesses of all sizes are terminating their long-term commercial office leases and replacing them with shorter-term agreements with flexible-workspace providers like IWG," Dixon said in a statement in October.

The company, which has nearly 3,500 locations in more than 120 countries, posted its highest-ever quarterly revenue on Tuesday.

Gen Z fueling coworking

The number of coworking spaces in the US rose by 10% in the second quarter of 2023 versus the first quarter, according to researchers at CoworkingCafe.

In Germany, Kollewe says the number of coworking spaces is on the rise, adding that he expects the demand to increase.

"GenZ in particular no longer wants to change their place of residence for a job," said Kollewe. "Working from home at the kitchen table or the living room table — that can't be a permanent solution."

Edited by: Uwe Hessler