Big Brands vs Independents: Does Size Really Matter?

Corporates are big business

In business, there are times when bigger is better. But in a market consumed with shrinking space, it’s often smaller players that win big.

Just like any industry, some operators are consumed with expansion. Last week, OT mulled the ramifications of a current investigation by the UK Competition & Markets Authority, which has put a potential stopper in the works of a completed merger between Regus and Avanta.

Of course Regus is not alone in its quest for market coverage. Other big players include Bizspace with almost 100 UK locations; Asia’s Executive Centre with over 70 locations; Servcorp with 140; and Premier Business Centers with over 70 U.S. sites.

“No-one comes anywhere near Regus is terms of size and market power,” says Jonathan Price of Business Centre Capital Co Ltd, “and without a sustained campaign of acquisition, backed by substantial capital resources, no-one ever will.”

Yet, excessive growth is not on the agenda for every business centre or coworking operator – and the industry is all the better for it.

Sophie Turnbull, Head of Operator Relationships at Instant Offices, says that independents – although traditionally popular with SMEs and startups due to their simplified cost structures and “personal approach” – are now attracting corporates for the same reasons.

“Plain white walls and blue carpets used to be the norm. But clients don’t necessarily want the standard corporate ‘look’ anymore – they want something more personal and unique. They want to be allowed to become ‘part’ of the building,” she says, explaining that independents are often more agile in their ability to fulfil those needs.

Clients are often swayed by the deep-rooted local presence of independents, who have influence and valuable contacts in their communities. There is also the feeling that small clients can grow with a business centre and “feel like a big fish in a small pond.”

Reputation

Of course, it’s not just independents and small group operators enjoying the spoils of flexibility. Large operators have their own benefits that come with a sizeable portfolio and a recognised brand.

“Large operators have a reputation behind them and they generally have established operational procedures in place, such as back-up and security systems,” Sophie explained.

“Some clients naturally prefer large operators with multiple locations, because they value having access to their entire building network. We find this is often particularly important for travelling businesses.”

She added that many larger centres also have consistent branding, which appeals to some corporate companies who want a standard approach.

“Longevity”

As Sophie explained, such a rich diversity of size and style enables brokers and operators alike to fulfil an ever-widening range of clients requirements. One of the welcome side-effects is that serviced offices are no longer viewed as a temporary solution.

“Many clients no longer view flexible workspace as a temporary solution. We’re seeing more longevity,” she said. As an example, she cites corporate clients who, having consulted with conventional property agents, have come back to Instant to move forward with a flexible office.

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Regardless of size, flexible workspace operators – through their individual approach, offering, flexibility, personality, design, and service – are successfully fulfilling more client needs. It’s enriching the industry, widening its appeal, and attracting big business into the bargain.

In fact, so powerful is this effect that the industry is gaining recognition beyond the requirements of its occupants.

Jonathan Price, commenting on the merger between Avanta and Regus, believes that an integral part of the CMA’s investigation involves the definition of the serviced industry itself.

He explained that the outcome of the merger depends on whether the CMA considers serviced offices to be a separate market from other types of office space. If it does consider serviced offices to be a separate market, he says “recognition of the industry would be welcome, and is very overdue.”

Back to the question of size, and the bottom line is that the CMA’s investigation, and its subsequent evaluation of serviced offices as an official industry, wouldn’t be happening without a big player like Regus. Yet the market wouldn’t receive the business it does without the sheer diversity and personality on offer from independent centres. Richard Morris, CEO of Regus UK, himself conceded that independents would always be an integral part of the industry.

Never mind size, it’s size of choice that matters – and the industry is all the better for it. Do you agree?

Image: Olu Eletu

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