Four years ago, I wrote a post which continues to be one of my most read titled Taxis, Uber, asymmetric information and disruption. I really love that this keeps coming back up because the concept of asymmetric information is predominate in so many areas of the world.
One of the great things about many new technologies is that they seemingly introduce the concept of symmetric information between the user and a 3rd party. My Uber driver and I are operating with the same information the entire trip duration. Slack allows teams to allows share the latest and greatest information about what is going on. Github ensures that developers on a project always have the same code. Google ensures our searches are returning appropriate and intelligent results.
However, the sense of symmetric information is actually a false front. The driver and I may be operating with symmetric information but Uber is now a 3rd party in the middle of this transaction gaining additional information into the behaviors of both myself and the driver.
This brings me to landlords and companies like WeWork. Data in the real estate world is highly fragmented, compartmentalized and hidden. Landlords have an idea of what they would charge a new tenant. Companies know what their costs of occupancy are. Industry groups know the trends about how space is used. However, collectively, they do not have a shared picture of the corporate real estate marketplace in a single building let alone an entire metro area.
Almost by definition, each individual player in the CRE space has asymmetric information. Every deal is a stacked deck. Every negotiation lacks trust. Every closed lease actually introduces more misleading information into the marketplace.
WeWork supposedly was helping to fix some of that by showing the industry what the cost per seat could be in a market. Their per seat license cost was an attempt at a great benchmark for real estate costs in a city generally. You could see their fit-out standards, you knew which buildings they were in, everyone knew their lease timeline, and their license costs were published. Their very business model could have introduced a level of market intelligence for cities where they had a multi-building presence that had not previously existed.
This situation would actually apply a great deal of pressure to landlords because it would theoretically clarify a significant piece of hidden data around lease comps. If a company knows the going rate for most real estate in the city, they can more precisely negotiate their new lease. They even have a clear fallback if they aren’t able to get the lease value they want by taking space with WeWork.
In reality, this was still a ways off. But it was coming quickly. The ballad of WeWork may now throw the entire process into a blender and shake things up worse than they were before. But that just seems to be the way CRE goes.