WeWork’s Rise: How a Sublet Start-Up Is Taking Over

There is no possible way that any of this could ever go wrong.

The article fails to notice that there is a coordination problem among WeWork's landlords, just as there is among the creditors of any insolvent company. That is, even if landlords collectively recognize that WeWork is TBTF, and most of the other landlords make rent concessions, it is the rational thing for any individual landlord to be the spoiler and make no concession. So no equilibrium outcome here with voluntary multi-party renegotiation. Which is why court-supervised bankruptcy procedures are needed in the first place. As it will likely be the case for WeWork.

I had the misfortune of briefly working at a WeWork office space. With locked doors every five feet and the lack of camaraderie among the tenants, it was a miserable place.

Will there be deals on foosball tables at the bankruptcy hearings?

This article is preposterous and lacks basic reasoning (unless you look at this through a WeWork lens)

The stats dont support the theory. 15 million square feet is tiny when compared to the global market. NYC alone is over 400 million sf. 20 month leases; that is very short term. Average leases in NYC are 10 years. While they are trending down, 20 months buys very little breathing room in an economic downturn. Most Landlords will not have the option to renegotiate their leases unless their Lender approves, in which case, they may lose control of the asset. Property Management fees are minimal. Third Party firms like CBRE and JLL provide these services at cost in order to secure the agency leasing. WeWork is not going to survive on Property Management fees. This story would be better told after Thursday..... How much cash have they burned YTD? A very sexy, creative business platform with a huge flaw. "It's the economy stupid". We all seem to forget that.

Even if WeWork held on to property management and morphed into a Marriott-style company, it would lose all of the upside when the economy bounced back and rents rose. Right now, their business model is just a high-risk bet that rents will keep rising.

What's to keep Softbank from keeping some of that $100 B fund for buying the real estate on the cheap from the landlords who lose it and then turn around and sell that real estate at the top of the market in several years when the depreciation benefits have run out?

President Trump has used the same tactics successfully for years with bankers. Borrow money, build big things of dubious value (Casinos, Hotels, Apartment Towers, Golf Courses) and when things go South renegotiate since bankers are loathe to write off the loans and don't want to become landlords. As my father said to me many times "a one customer business is no business".

WeWork's name should more accurately be "WeSometimesWork". The entire company was founded on and profits off of a lack of commitment from management to employees- whether they are classified as employees or not. The whole system is a ponzi scheme, and will collapse like the housing market did a decade ago. Month-to-month as a business model works for show biz and cleaning services, but beyond that it's just shortchanging people, and vulnerable to changing economies and regulations.

The trouble with the article's core argument that landlords will accept lower rents instead of evicting WeWork or driving it into bankruptcy is that it assumes that commercial landlords will do what is best for the commercial real estate industry as a whole. That is not the case. While refusing to negotiate with a non-paying WeWork might be bad thing for the commercial real estate market as a whole, it is quite easy to see that it is best for each individual landlord if they don't negotiate and instead demand that WeWork pay them full price and pay everyone else less. Those landlords are also quite able to see SoftBank's support and might want to gamble that SoftBank will bail out WeWork to the point that the rents get paid in full. The only real way to bypass that for sure is for a neutral third party to renegotiate all of the leases at once and force the landlords to accept the reduced contract terms, which is pretty much exactly what a chapter-13 bankruptcy is for.

WeWork sports one additional protection against a downturn not mentioned by Sorkin. It's multinational. Just because there's a downturn in New York City doesn't necessarily mean there's a downturn in Berlin or Tel Aviv or Shanghai or all of the other 20 countries in which it operates and where it can still rent space to large companies. The company, WeWork, has legs.

I think in a down market with people being layed off,we will see a lot of small startups.They will be a perfect fit for we work space.

The basis of this article is preposterous. It reads like a roadshow slide / PR piece put out by the WeWork. WeWork is classically buying at a discount in bulk (i.e., leasing property from landlords) and selling at higher price in smaller quantities (i.e., to its end customers). Unfortunately its leases are long term and yes, landlords my renegotiate them a bit in a recession, but not before wiping out the shareholders. This is how bankruptcy / debt settlement works for companies that lease real estate. Furthermore, while larger companies may be leasing for slightly longer from WeWork, they're using this a flexspace in that can be rapidly eliminated in a downturn. Finally, WeWork is combining two of the most cyclical business sectors, commercial real estate and start-ups, and not in a good way.