Co-working has been ‘stealing’ clients from the nation’s top firms for years. The relatively new form of office space has created a fundamental shift in the tides that the top brokerages are struggling to adapt to. Now that flexible office space is set to grow thanks to many companies’ need for a more distributed workforce, brokerages are finding ways to work with or in some cases acquire co-working providers to tap into this growing market. We break down each brokerage’s effort to bring co-working in-house.
One of the biggest deals of the year kicked things off early when CBRE announced it was acquiring a 35 percent stake in Industrious for $200 million in cash with plans to take an additional 5 percent in the near future. The deal made CBRE Industrious’ largest shareholder overnight, folding the brokerage’s established Hana flex-space brand into Industrious. The defining factor in CBRE’s deal is the fact Industrious doesn’t lease co-working space, they manage it. Industrious will take over the Hana brand, extending into Industrious’ more than 100 locations in the US and UK. CBRE’s Andrew Kupiec, CEO at Hana, will lead the relationship with Industrious. CBRE’s President & CEO Bob Sulentic and Global Chief Investment Officer Emma Giamartino will join Industrious’ Board of Directors as part of the transaction. The deal is unique because Industrious and Hana aren’t co-working providers in a traditional sense, they specialize in private offices and suites, leaning more towards flexible-office space than outright co-working. Industrious also partners with landlords, offering a share of profit in exchange for lease flexibility. With success, that model could create a new industry standard.
“Our investment in Industrious is consistent with our view that flexible office space is playing an increasingly central role in companies’ occupancy strategies and aligns us with an exceptional operator and an outstanding leadership team that is executing a great strategy,” CBRE CEO Bob Sulentic said. “We have been building our Hana flex-space business expressly to meet the flex-space opportunity and Industrious now enables us to capitalize on it at scale with a portfolio of well-situated units in key markets.”
Cushman & Wakefield
Last year Cushman & Wakefield threw its hat in the co-working ring with INDEGO, a white label service for landlords and investors in the UK. Cushman & Wakefield’s head of flexible workspace Emma Swinnerton, who joined the firm in 2018 from Regus, will lead the team that will specialize in bespoke flexible workspace. For now, Cushman & Wakefield is taking things one step at a time, only operating in the UK with plans to expand in Europe. Eventually, the brokerage hopes to expand Indego services outside the continent.
“INDEGO enables our clients to meet the rapidly growing demand for flexible workspace—and the improved returns it offers—on their terms,” Swinnerton said in a release. “Cushman & Wakefield has been at the forefront of the evolving office market for many years and our investment in INDEGO demonstrates where we believe this exciting sector is heading next.”
Newmark had its eyes set on Knotel after the flex-space provider filed for Chapter 11 bankruptcy earlier this year. The filing outlines Knotel’s plan to sell the business to an affiliate of Newmark Group. Knotel got a $20 million commitment for debtor-in-possession financing from Newmark. Once valued at $1.6 billion, Newmark’s deal with Knotel is reportedly worth $70 million total. Before it hit rough waters, it looked like Knotel was one of the only serious rivals to WeWork in size with dozens of locations in 17 cities. Knotel’s particular model is centered around providing flexible office space in subleased office space to corporate clients. The COVID-19 pandemic proved fatal to Knotel’s prospects, early in the lockdowns Knotel laid off or furloughed half of its 500 person team, bracing for the worst. Plenty of investment poured into Knotel but profitability was never achieved before the coronavirus dealt the final blow. With access to new capital from Newmark, Knotel has a lifeline from which to build on its innovation.
“We see tremendous growth and long-term opportunity in the flexible office market, which Knotel has taken to a new level,” said Barry Gosin, CEO of Newmark. “On both the ownership side and the tenant side, there is a recognition that innovation is coming and flexibility is the hallmark. With this investment in Knotel, we’re supporting this powerful platform and bringing it to our unparalleled network of owners and tenants.”
Colliers struck a partnership with Upsuite, a free online marketplace for flexible workspaces where users can find, compare, share and select co-working spaces. Upsuite was nurtured to fruition as part of the Colliers PropTech Accelerator Powered by Techstars 2018 class. Colliers’ and UpSuite’s take on flex-space differs from the others because it is designed to connect users with all other available co-working providers. Think of Upsuite as a sort of listing service for co-working and flex office space. Upsuite details cost, availability, amenities, and the like to help users quickly assess different options so they can find the right one for their growing business. In that sense, Colliers’ is agnostic to the provider or the landlord.
“By targeting innovation through the resources of the PropTech accelerator program, we are able to create solutions, shape technologies, and find opportunities that will advance our business and the industry—our partnership with Upsuite being one of them,” said Gil Borok, Colliers Chief Operating Officer. “I look forward to our continued efforts in uncovering and shaping enterprising solutions for the commercial real estate industry, providing a competitive advantage for Colliers’ clients and employees alike.”
Mega brokerage JLL has teamed up with the biggest name in co-working, WeWork. These days the beleaguered co-working giant needs plenty of help after a disastrous IPO. WeWork has tapped JLL to help market properties in New York and Los Angeles, an estimated 20 percent of WeWork’s portfolio. JLL isn’t the only brokerage brought on to help, CBRE is reportedly marketing a few of WeWork’s locations on the west coast as well. JLL went a step further by bringing WeWork’s facilities staff onboard in the US and Canada, hiring them as part of JLL or of the company’s partners. WeWork engaged JLL further by asking the brokerage to help negotiate rent relief or convert lease deals into profit-sharing agreements as a way to weather the pandemic. The relationship between JLL is still evolving with plenty of other suitors ready in the wings. For now, WeWork is content to date JLL, if not exclusively. Should the relationship turn into something more serious, the two powerhouses could create a monumental shift in the co-working space. JLL has dabbled in creating its own flexible spaces and co-working spaces at various locations, Like Orchard Workspace in Brooklyn, but so far hasn’t tied them together as a brand or single provider.
“Businesses will continue to have a need for flexible office space as they recalibrate occupancy strategies in the near-term, and long-term trend lines show an increasing demand for flexible office and meeting spaces in the post-COVID world,” said Ben Munn, JLL’s Global Head of Flexible Space
Co-working and flexible offices are blurring the lines between workspace and common space. It’s fitting then that the industry is also blurring the lines of brokerage. For nearly a decade, brokerages have watched clients take space in co-working. Brokers themselves have jumped ship too, only to be acquired by their former employer. Co-working and flexible office space is a rapidly growing industry but ties between providers, landlords, brokers, and designers are reminiscent of a high school social scene far too extensive and dramatic to fully cover. While this serves as a cursory breakdown, it’s important to remember space providers and brokerages are often working with or are in talks with one or more other parties, sometimes formally, but often informally. Blurred lines and beaten-down businesses have some of the largest players in commercial real estate muscling around for size in the rapidly growing new line of business.