In an article that recently appeared in Property Week, Yardi explored the many sectors of flexible office space and the future of the industry. Yardi brought together a panel of industry experts to analyze these topics last month. Here are some of the main points from the roundtable discussion.
Defining our Sector
What should we call this industry? Does it even matter?
Those were the initial questions posed to the panel. Per Chris Pieroni, operations director at Workspace Group, the flexible workspace market as a whole is characterized by terms such as coworking, hybrid, service, among others. But in some cases, you may not fall into any of those ‘definitions’. Overall this is the flexible workspace sector, and there’s nothing wrong with calling it that.
Defining flexible is a task in and of itself. Joff Sharpe, head of operations, British Land, says its all about customer responsiveness. Basically its not about the lease length and language terminology. He believes flexibility is our industry becoming better aligned with the requirements of the members.
Mary Finnigan, head of real estate transactions for WeWork, believes the word coworking defines part of their business model, but WeWork also offers private offices and enterprise memberships to corporations of over 1,000 employees. So their scope and definition stretches broadly.
Attracting members through community
Our own Tony Freeth, director of Coworking, Yardi Europe, was part of this insightful panel. He was asked about the impact of the community aspect to attracting members. He feels like seeing a person or a business grow in stages in your space is a huge benefit to Coworking. Your space evolves along with their growth cycle. Many entrepreneurs truly love the community aspect to working out of a shared space, as opposed to isolation. Finnegan says 50% of their members are transacting with eachother.
Pieroni admits the community aspect is not something well understood in the real estate market. But creating an ecosystem and listening to the feedback from their members has helped change that mentality little by little.
Sharpe provided a contrasting point of view. When you’ve got a larger enterprise client, or a tech company or anyone dealing with confidentiality in their work, they may not want to be as involved in the larger ecosystem and interrelations with other members. Sharpe feels community isn’t a good or bad thing, its just something natural that exists in Coworking and you need to segment your market to apply a logic.
Finnegan feels there’s a misconception around WeWork in that they are the big bully brand and they aren’t receptive to members expanding and creating their own identity outside of WeWork. She says they are happy for members who acquire larger chunks of space and get to brand their space within their building.
Freeth made a point that the investment side of it is important because the brand creates intellectual property assets. Branding is vital if the operator is in it to truly increase value. Blackstone recently bought out The Office Group, now valued at $640M.
It’s hard to value this sector. We’re aware of investor concerns due to the viability of this industry. But Sharpe mentions the Softbank investment in WeWork, which is valued more on things you’d associate with other companies, not necessarily a flexible workspace brand. Pieroni believes a problem is valuers don’t know how to value short term income.
He believes theres a stronger security of income from a broad spread of businesses than from one company. You’re valuing your customers (members), growing and contracting. Equity analysts value the real estate but may not be taking a view on the quality of the management. And that’s pushing some of the values, with the management teams’ visions for the future.
Rent would seemingly have to come down at some point as markets become more saturated right? Williams believes in London and NYC, which are at saturation point, yes. Otherwise, there’s no slow down in sight. Pieroni explains that operators dont use the word rent in their day to day business. Desk rate, membership fees, cost per month. Those are the terms they use.
To read the full panel discussion please click this link. It’s truly fantastic insight into the business side of the flexible workspace industry. To learn more about the new Yardi Kube and how it’s the platform of choice to power Coworking and shared spaces, click the link below.
Yardi Kube is a provider of a Workspace Management Platform delivering you all the tools needed to grow a smart and connected workspace. The WUN Platform enables your technology to work intellligently together from managing leads and monthly billing to on-demand Internet and Voice services. With all the hardware, software, and essentials for building a thriving workspace, WUN’s platform helps you increase revenue, maximize productivity, and build community. WUN’s mission is to provide the blueprint for growth and efficiency in your workspace.