“Too Big to Fail” author says WeWork may now be “too big to fail”

Adam Neumann and New York City (Credit: Getty Images and iStock)

It’s been called a “$20 billion house of cards” and a “Ponzi scheme.” Now, WeWork is being called “too big to fail.”

Andrew Ross Sorkin — author of “Too Big to Fail” — argues in his latest DealBook column for the New York Times that WeWork now has so much space in so many cities, its landlords can’t afford to let it go under.

The co-working giant now controls 15.5 million square feet across 335 locations in 24 countries and says it is the largest tenant in Manhattan, Washington D.C. and London. So, when the next economic downturn arrives, WeWork’s landlords might not be able to evict it even if it can’t pay its rent.

“If they were to let WeWork fail, those landlords would risk depressing commercial real estate prices to such a degree that it would create a serious sense of pain for the country’s largest real estate owners,” Sorkin wrote.

He said a more likely outcome would be for landlords to “swallow hard and renegotiate the lease agreements on more favorable terms to keep WeWork from creating a full-on panic.” They could also have the company start acting as a property manager in the vein of Marriott, which manages rather than owns or leases hotels.

The co-working giant announced in its third quarter earnings that SoftBank had committed another $3 billion to it, bringing its total valuation to $45 billion. It’s now one of the largest U.S. startups, second only to Uber.  [NYT] – Eddie Small

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