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The superfluous perks are a red herring, they’re not why WeWork doesn’t work. Regus filed for bankruptcy after the dotcom collapse for similar reasons WeWork is
by SirensOfTitan 7y ago
The superfluous perks are a red herring, they’re not why WeWork doesn’t work. Regus filed for bankruptcy after the dotcom collapse for similar reasons WeWork is struggling: taking a bunch of long term leases and re-leasing them out as short term leases to economically vulnerable businesses is a recipe for disaster.
- silasdavis 7y agoWhy is it? If there is a steady supply of economically vulnerable businesses and you charge a relative markup?
- doomrobo 7y agoBecause they have long-term liabilities with short-term income agreements. If there's market downturn, all those companies that were their customers disappear. But the bank doesn't disappear and We still owes them their monthly mortgage payment.
- IAmGraydon 7y agoEveryone keeps parroting this same statement because they don’t really understand how commercial real estate works. First of all, there are many creative ways to exit a commercial lease. I won’t go into it, but do some research. Landlords would rather have a paying tenant in the space than go chase a bankrupt company in court. Second, they are charging several times the PSF rate they are paying to the landlords, which acts as a hedge against volatility. You pay a higher interest rate for higher risk credit - this is basically analogous. Third, there’s nothing stopping them from subleasing the space to larger, lower risk tenants if the market calls for it. Source: I work in commercial real estate.