The fall of WeWork shows the deepening cracks in real estate

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Since it was founded in 2010, WeWork has not once turned a profit. For years its cash-torching ways went unchallenged, thanks to the reality-distorting powers of its flamboyant founder, Adam Neumann, who succeeded in convincing investors, most notably SoftBank, that it was not an office-rental business but a zippy tech firm on a mission to “elevate the world’s consciousness". At the height of the silliness in early 2019, in the lead-up to an initial public offering (IPO), the company was valued at $47bn.

The unravelling began soon after, as outside investors balked at its frothy valuation and questioned an unorthodox governance arrangement that gave Mr Neumann an iron grip on the company. The IPO was shelved, and Mr Neumann was offered $1.7bn to leave. Sandeep Mathrani, a real-estate veteran brought in to run the company, did his best to right the ship by cutting costs and renegotiating leases.

In 2021 he succeeded in listing the firm through a special-purpose acquisition company, at a valuation of $9bn. Yet his efforts were undone by the slump in the office market brought on by the pandemic and an enduring shift towards remote working. On November 6th WeWork, which leases office space in 777 locations across 39 countries, filed for bankruptcy.

It is not the only property business in turmoil. Days earlier, on the other side of the Atlantic, René Benko, a once celebrated Austrian property magnate, was ousted from Signa, the €23bn ($25bn) property empire he built. Its portfolio includes the Chrysler Building in New York; the KaDeWe, a posh department store in West Berlin; and a stake in Selfridges, another ritzy temple of consumption in London; as well as luxury hotels, high-end developments and a grab-bag of other retail