After years of frenzied growth, rocketing prices and new market entrants, it’s perhaps not surprising that London’s flexible workspace scene is said to be overheating.
Is London still calling, or is the nation’s capital putting workspace opportunities on hold? To find out, OT spoke with James Barnett and Jonathan Masri, co-founders of WorkPad. This specialist provider of serviced offices in Central London launched in 2013, yet the duo has already amassed a seven-strong portfolio of flexible workspaces.
Here, they explain the story behind their launch and rapid growth, and what they think the future holds for WorkPad along with the flexible workspace industry at large.
Q: Can you explain how the opportunity to launch WorkPad first came about?
The idea of the business initially stemmed from trying to find an office for ourselves for a previous business. The complexities of finding and securing a traditional office lease are immense, time consuming and overly complex for someone who is not well versed in the property market. Suitable space is scarce, leases are generally overly complicated, and if not careful, a tenant can end up over-exposed to the landlord.
Once you have got over these hurdles and successfully secured an office space, you need to sort out cleaning, internet and connectivity, furniture, decorating, business rates, utilities, service charges etc, all of which can be detrimental to the focus required on actually running your business. It’s a huge undertaking so we set out to simplify this process for like-minded businesses and companies who are struggling to get their foot in the door.
Q: Did you have any prior experience of operating flexible workspace?
Having ourselves struggled to find suitable office space for another business, we started WorkPad in September 2013 with one co-working site on Lexington Street. It was a very cool space and we had a lot of up-and-coming companies and individuals in that office, which meant we learned how to deal with a variety of different businesses and individual requests.
Q: The portfolio has grown very quickly in a short space of time. What have been the main drivers of this growth – and do you see it continuing?
We have been lucky enough to identify a growing demand across the economy from small start-ups of around 4-8 employees that want to be in central London. Focusing the business on this niche has allowed us to expand and grow the portfolio and we are now in the process of securing our eighth property. It’s a niche that we’ve been able to target both from the perspective of our customers and also the landlords.
If you look at it in simplistic terms we’re acting as a bridge between those two sides of the market. We’re enabling companies to move into desirable central London locations – which they otherwise wouldn’t be able to afford due to the rising costs of rent – and we’re also helping from a point of view of landlords. We take buildings that are around 1,500-3,000sq ft, which is too big for a small company to take on its own in this economy but also too small for other managed office providers to take.
That niche has been important in allowing us to offer a boutique kind of service and differentiate ourselves from our competitors. Rising prices in the London property market has also helped, as they have led to both businesses and landlords warming to the idea of managed offices.
Q: What have been the biggest challenges in growing the WorkPad brand, and how have you overcome them?
The biggest challenges that are specific to our industry are the identification of suitable properties and battling against the rising cost of rents. The prices of properties are continually rising in London – in the three year period since we set up the first WorkPad office in Soho, we have seen a 250% increase in rents. This, coupled with business rates going up dramatically – in line with current rental prices – has made the cost for companies to traditionally lease a building in central London astronomical and this will eventually be unfeasible for many businesses.
This works both in our favour and against us. We hope rental prices won’t go up too much further as this will force us to put our costs up, but at the same time it makes our proposition more attractive both to customers and landlords.
Landlords have also traditionally been averse to taking on serviced offices or co-working businesses. However, Landlords are increasingly finding it difficult to fill their properties because their rents are too high, while companies can’t afford to rent property for the same reason. We’re therefore matching the landlords with a specific market, whilst offering companies a flexibility that they don’t get with a traditional lease. As such, both sides are coming around to the concept of serviced offices.
Q: You mentioned that community is an important part of the brand. How do you balance a good community with solid revenue?
We devote a huge amount of resource to our customer service, which means we have very good customer loyalty. For most of our customers who have come from other serviced offices, their number one complaint is that they don’t feel attached to their office provider; they have felt that they’ve taken the space and been left to get on with it.
Our approach has been to actively go against that mould and make them feel that they are part of a community. We use CRM and management tools to make sure that any complaint we receive is handled within in a specific timeframe, based on how serious the issue is. For example, if it’s a wobbly chair we’ll get that fixed within a day but if the Internet is down that has to be resolved straight away. On top of this we encourage our customers to make their space their own.
Q: There are a lot of new market entrants, and some conventional landlords are also offering flexible terms to attract SMEs away from coworking and serviced space. How is WorkPad competing with these challenges?
We are operating in an increasingly crowded market place and in order to succeed, you have to stand out in whatever way works for your company. It is crucial to carve out a niche in order to meet specific demand. When setting up WorkPad, we didn’t want to go down the route of traditional operators or the new style of coworking following in the footsteps of big players. We wanted to do it better and be different, focusing on the customer service and high end product, rather than giving companies office space and just letting them get on with it.
Q: What are your thoughts on the London market at present?
The current trend in the property market is simply that rents are high and going up. Business rates are also due to go up, so the cost for companies to traditionally lease a building in central London has become astronomical.
Landlord prices going up force our costs up too, making it harder for us but not unviable, because the prices are also reflected in the traditional lease market for our potential customers. We just have to work hard to ensure our customers are satisfied and are getting value for their money. Fortunately we are not yet at the stage where that has impacted the prices we charge.
With regard to demand, we don’t see this slowing. There’s an increasing trend that graduates are setting up their own businesses, whereas top-level academic students, when they graduated, would previously have gone to work for the likes of Merrill Lynch or Goldman Sachs. There’s a lot of young talent in the business industry starting apps or tech companies, for example, and with that comes the demand for affordable and flexible lease agreements.
As such, there is a huge desire for companies to be in central London and be around like-minded companies. But small businesses are being priced out of the market. Location can play a huge part in helping to drive growth in a business; it’s good for a brand and good for image. From our own business perspective we have recently launched a new location [Carnaby Street] and in 2016 we have a target of securing another four locations, so we’ll aim to have ten plus properties in the portfolio. Currently we’re in Soho, Covent Garden and Marylebone and we’re also looking to move into Fitzrovia very soon.