Bigger Pockets: The Lesson Real Estate Investors Can Learn From WeWork and McDonald’s

Despite the investment challenges facing investors today, there are plenty of opportunities around. Real estate may not see like one right now with today’s interest rates.

However, history shows that investing in real estate can lead to great returns over time. That’s not just true for investors. Companies that own real estate can benefit from that long-term trend. It may even prove more profitable than their underlying business over time.

For instance, co-working space company WeWork (WE), once valued at $47 billion in 2019, never actually ended up owning any real estate. That may be why shares lost 99 percent of their value following their IPO.

At its peak, the company ended up having over 850 locations, all of which were leased from commercial properties. Had the company started smaller and owned the buildings, it would have been able to better pivot as conditions changed.

In contrast, fast food chain McDonald’s (MCD) owns the land under its restaurants. And that land is often in high-traffic areas, leading to increased value over time.

In fact, company founder Ray Croc once quipped that he wasn’t in the burger business. He was in the real estate business. Owning the land allows the company to benefit from real estate, while the company’s franchisees do the real work of producing food.

Today, McDonald’s owns over 40,000 locations in over 100 countries. That shows the power of companies that own real estate.

To read the full details on real estate ownership, click here.