Property expert David Thame discusses the future of work with Convene’s James Frankis and BE Group’s Jonathan Weinbrenn.
The bar at Convene’s new space at 22 Bishopgate
We’ve all been there. Microsoft Teams is live, everyone is studying everyone else’s spare bedroom wallpaper and making anxious small talk whilst waiting for the final participant to dial in.
Several minutes later James Frankis, Director of Workplace Product for premium US-based coworking business, Convene, appears online. He’s working from the West Country in a ‘not-spot’ so deprived even a text won’t send.
In a way, the rocky start to his chat with Mix makes the point beautifully: working from home has its limits, and any business that depends on home working quickly runs into them.
James, whose high-end vision of coworking opens in the UK soon, with two large City of London bases (70,000 sq ft at 80 Fenchurch Street and 100,000 sq ft at 22 Bishopsgate) thinks that the limitations of homeworking, combined with a clear brand offer and some short-term fixes, will help his version of shared workspace survive.
And survival is an issue. WeWork, the mother-and-father of funky coworking, has seen its business crunched by a combination of coronavirus and its own excessive hubris. WeWork is burning through cash at the rate of more than $500 million a quarter as its cautious coworkers stay away from the office.
Headspace Group (part of BE Offices)
IWG, better known as Regus, also made an operating loss and expects a tough year.
So how will the serviced sector’s business model survive post-COVID-19? Trapped between their own landlords (with whom they have signed inflexible long-term leases at fixed prices) and their tenants (buying on short-term, very flexible deals at variable prices) they face a challenge. That so much serviced space depends on high density crowded floorplates makes them particularly unappealing in an era of infection control.
Two of the leading thinkers in the sector – one running a white label serviced floorspace business focused on the big corporates, the other a new entrant with a premium product – provide some light amidst the shared workspace darkness. Convene’s James Frankis and BE Group’s Jonathan Weinbrenn can show the way.
Jonathan runs the BE Group bespoke white label service office space operation, providing floorspace for corporates who brand it as their own. He says the lessons of the pandemic are easy to point to, but difficult to learn.
Headspace Group (part of BE Offices)
‘We know, for instance, that cheaply-built, stack-them-high office fit-outs open operators and occupiers up to all kinds of risks. Not just health and infection control, but complaints about sound, privacy, fresh air, and so on. What we need to do is create vibrant spaces that answer those needs and can control virus movement but that aren’t, at the same time, regimented. You want a workplace where people can be stimulated but can also feel safe.’
Jonathan admits there is a danger that operators’ (and their designers) gold-plate infection control standards get to the point where work life becomes intolerable. And he agrees that the craving for human contact, for lightness and joy, cannot be banished from a safe workplace. The big challenge is to find a way for serviced workspace to feel trusted.
‘Our clients have lots of choices. They could do what we do themselves, if they wanted. So we need to show they can trust us to get it right on service guarantees and risk assessments,’ he says.
Their white space business has barely lost a client since the coronavirus lockdown in March but, plainly, some contracts will not be renewed. Occupancy is down 8% on pre-pandemic levels. Safe to say WeWork would kill for that vacancy rate.
‘The serviced office occupiers who have suffered did so because they were not prudent. They obsessed about market share, signing bad deals in buildings that won’t work for them. But if you understand profit and loss, and hospitality and property, operators can thrive,’ he says.
Convene’s James Frankis is thinking hard about the world of workspace that will emerge, medium-term, once the virus is under control.
‘We’re betting there will be a return to work, which is different from what we’ve seen before, in which everyone now working from home returns to the office, but in which most people work from home a few days a week fairly regularly,’ he explains.
James is working on a series of app-based innovations, which will help bridge the cultural divide between workplace and home office. The business is also finding ways to re-open live events (business meetings, training, conferences) but allow remote participation.
But they are also thinking keenly about the physical experience of being at work. ‘The office was the great leveller,’ says James. ‘Everyone, from the most senior person to the most junior intern, shared the same kind of desk, the same air conditioning, it was a very democratic space in a way that working from home is not.
‘If our customers are coming into the office three days a week, then the office becomes much more of a place to meet and collaborate. We think desk densities will go down, and we’ll see more collaboration space – large tables, white boards and so on. Serviced offices won’t be about a lot of desks, they will become some much more diverse, and smarter.’
With up to 50% of workstations gone to allow for social distancing, and occupiers removing desks and inserting comfy chairs, how does per workstation pricing function?
This poses a financial challenge. With up to 50% of workstations gone to allow for social distancing, and occupiers removing desks and inserting comfy chairs, how does per workstation pricing function? How can operators like Convene make this pay?
The immediate answer is to stop charging per workshare and start charging per suite, allowing the occupier to decide how densely desked this space becomes.
The cleverer, riskier answer is to hope that everyone needs more suites.
‘We’re not taking this lightly. Yes, this is a difficult time for the office market. But post-COVID-19 we think there will be increased demand for flexible office floorspace – that’s what we’ve already seen in the Asian markets, as they return to work. In the short-term, we will see a boom in the flexible market. Rather than us suffering, the sufferers will be traditional landlords trying to shift 15-year leases.’
The conclusion both James and Jonathan draw is that the surge in coworking and serviced workspace we saw before coronavirus will, after a few months of stumbling, find its feet once again.
Not only will operators recover their mojo, but traditional landlords will form partnerships with serviced office operators and convert existing mainstream floorspace for flexible use.
Don’t give up on serviced floorspace, don’t give up on the idea that buying floorspace wholesale and selling it retail can be a paying proposition. The best, they agree, is yet to come.
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