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What WeWork’s Demise Could Do to NYC Real Estate

The troubled coworking company is the largest office tenant in New York City. What happens to the city’s commercial real estate market if it goes under? At the start of 2019, the coworking company WeWork was leasing between 500,000 to 1 million square feet of new space in cities around the world, every day. As startups and freelancers and established firms turned to its network of shared offices for flexible rentals, WeWork started to resemble tech goliaths like Amazon and Uber—more than a business, it was a vehicle for grandiose statements about the future. WeWork’s expansive vision included opening a pricey “conscious entrepreneurial school” called WeGrow, and the company’s CEO, Adam Neumann, dreamed of becoming the first trillionaire prime minister of Israel, or maybe (also?) the next president of the United States.

Over the past few months, however, bad news about the business has snowballed. WeWork’s parent operation, the We Company, was primed to go public in September at a value of $47 billion. That number was slashed in half overnight as doubts about the company’s business model and details about Neumann’s spendy behavior started to fill the news. The losses are staggering: $1.3 billion in the first half of the year, or a loss of $5,200 per customer per year. By mid-October, Neumann was out, and the IPO had been delayed indefinitely. The WeGrow academy shuttered. Thousands of layoffs are planned. This week, Bloomberg reported that the We Company is considering a bailout that would put the company under the control of Softbank, the Japanese investment company that heavily funded it.

WeWork is the largest office tenant in New York City, surpassing J.P. Morgan Chase in 2018: It holds some 8.9 million square feet of office space and has more than 100 locations in Manhattan. The company’s sudden decline—and the specter of a broader economic slowdown—has some observers asking what will happen if WeWork goes under, especially in Manhattan, where flexible office space is king.

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