It Was Bound To Happen
There is always a disconnect somewhere. The government takes time to catch up to the realities of the private world. Start-ups look to disrupt industries sometimes without having any true knowledge of the industry. I can point to several of those.
Starting in the mid-90’s one of the most frustrating things about growing a business was office space. Taking a 10-year lease for a company that ends up growing multiply times over is ridiculous. The landlords didn’t get it and had a very hard time wrapping their arms around how to deal with it. Then along comes WeWork. Shared office spaces that are flexible. You could even rent a full floor if you wanted. They took over the leases to break them down for smaller companies that could grow with ease until they went on a spending rampage outside of the model.
WeWork was always a real estate company but had somehow convinced their investors that they were a tech company. As we all know, the company eventually imploded and now is back on track with real estate people running it. The current CEO is Sandeep Mathrani who came out of the real estate world. Cushman & Wakefield, one of the largest real estate agencies, just announced a $150m investment into the rebuilding of WeWork. Coldwell Banker Richard Ellis invested $200 million in Industrious, and the NewMark Group is going to acquire Knotel.
It was bound to happen. Real estate companies have deep pockets. They have come to understand the opportunities available. Just like others who are watching start-ups disrupt the models, many have stood in the wings waiting to swoop in and use that know-how to fix their models.
Unfortunately, WeWork is a classic tale where everyone’s eyes were bigger than their stomachs. The amount of money pissed away is criminal. My guess is over time we will see more companies who have attempted to disrupt industries with massive amounts of cash will fall into the same reality. If it looks like a duck, swims like a duck, and quacks like a duck, then it is probably a duck.