Everyone disses wework and regus for having bad business modes. “Asset-liability mismatch” they say smugly, referring to the long-term lease they sign to get short term monthly rents. Buying a building on a 15 year loan and then renting it out 1-3 year leases is the same thing!
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So that begs the questions, if not asset-liability mismatch, why does wework not make money and why has regus gone busto multiple times? It’s because 1. They are Discretionary 2. They have in-built competition 1 means they are non-essential. They are a luxury.
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Just like eating out, going to a restaurant. These expenditures are first to be cut in economic hardship. Compare that to a 3 year office lease or a 1 year multi family rental. It’s easier to lay off employees than break the lease. And you need a place to live!
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2. Like restaurants, another notoriously competitive space, wework not only competes with spaces and regus. They must compete with starbucks and you working from home! It’s a naturally more competitive offering, just like restos compete with TV dinners and you making food at home
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