Co-working giant WeWork Cos.’ plan to lease as many as a dozen floors at One World Trade Center fell apart last month, sinking the company’s monthslong bid to secure space in one of the world’s tallest and most iconic skyscrapers.
WeWork had been in negotiations with the Durst Organization to rent about 220,000 square feet in the downtown Manhattan tower, which at 1,776 feet has been the tallest building in the Western Hemisphere since opening in 2014.
The lease negotiations faltered after Durst received better offers for some of the space that WeWork wanted. There were “more competitive numbers” from some media and technology companies, Chairman Douglas Durst said in an interview.
The sudden collapse of the talks took WeWork by surprise, according to a person close to the negotiations. Their demise represents a setback to WeWork’s rapid expansion in New York, even as it continues to spread its reach in major markets around the globe. The New York-based company opened 87 locations in 12 new cities in the first half of the year, and leases office space in China, the U.K. and Brazil.
WeWork provides short-term office space. The company typically signs long-term leases with landlords and builds out the raw space with common areas, open-floor work stations, meeting rooms, kitchens and individual offices to rent for as short as a month. WeWork has also added services to provide short-term leasing for midsize and large companies as well as dormitory-style residences.
With its plan to rent between seven and 12 floors in the downtown tower, WeWork was on the verge of becoming the biggest private occupier of office space in Manhattan—a marker the company will likely still achieve this year, real-estate analysts said.
“The World Trade Center is an iconic building and one in which we take a keen interest. We have, and continue to, explore opportunities to secure a location there and believe we will be an energizing force for the building,” a WeWork spokesman said.
The negotiations between WeWork and Durst bogged down several times but the two sides had managed to resolve some of the thorniest issues.
Servcorp , a company that offers co-working options similar to those offered by WeWork, is also a tenant in One World Trade Center. The company has a clause in its lease that restricts competitors from taking space in the building. Mr. Durst said his firm had been discussing a workaround.
Another sticking point concerned the tower’s strict security measures, which WeWork worried would cause complications for members from other locations who pay to access multiple WeWork buildings. Both sides had made progress on a solution to this issue, people close to the talks said.
WeWork disclosed in August that it had raised a further $1 billion in debt from SoftBank Group Corp. , which had already invested $4.4 billion in the company last year. That valued WeWork at about $20 billion. The company reported that its revenue more than doubled in the first half of 2018 from a year earlier to $763.8 million. Its loss more than tripled to $723 million as it spent money to open and market new spaces.
The company also has bought property, putting together a fund which acquired the Lord & Taylor flagship store in Midtown Manhattan this year. It has leases with other major New York landlords including SL Green Realty Corp. , Boston Properties Inc. and the Rudin family.
Some analysts say co-working firms such as WeWork have their downsides, too, in part because their tenants can be more costly to the buildings’ owners. They have higher usage of infrastructure, including heating and cooling systems, elevators, security and cleaning, according to a co-working report from real-estate services firm Cushman & Wakefield .
Write to Keiko Morris at Keiko.Morris@wsj.com