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Home CRE

How Do Flexible Workspace Operators With One Location Measure Up?

by Cecilia Amador de San José
January 15, 2019
in CRE
Reading Time: 4 mins read
A A
one location measuring up

Greater demand for workplace hubs and multi-location networks could spell trouble for small independent operators.

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  • With CRE crossing into the industry and integrating flexible workspace into corporate portfolios, the coworking playing field and its rules have changed.
  • From the landlord’s perspective, operators with multiple locations and networked buying power provide a powerful selling point; small operators may struggle to compete on this level.
  • On the flip side, smaller independent operators have the agility to accommodate specific niche requirements, which larger companies may not be able to fulfill.

Flexible workspaces are the new normal. They are even having a great impact on the larger office and commercial real estate industry.

The industry has reached the point where it’s already crossing with CRE. This is great news; it means the industry has matured, it’s gained trust from other stakeholders, and it’s bound to experience more growth — which also means increased competition and M&A activity.

For a little over a year now, experts have been saying that the time is nigh for the industry to have real winners and losers. Those facing the most risk represent the majority of the US and UK markets.

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Last year, the Instant Group found that independent operators make up 93% of the US market and 83% in the UK.

What’s changed?

If small independent operators are dominating these markets, why are they now most at risk? With CRE crossing into the industry, the industry’s playing field and its rules have changed.

Landlords and property owners are interested in the industry. Those who go at it alone will no longer find motivation in leasing out their space to small, single site operators. Those who plan to use a 3rd party to operate and run flexible workspaces within their buildings will likely partner with larger operators that have a proven track record of running a large-scale operation.

Suggested reading: Rubenstein Partners Announces First Partnership with Industrious to Bring Premium Coworking into Its Portfolio

Then there’s the future of work and evolving work dynamics.

Flexible workspaces blossomed in an era where mobility empowered professionals to work from anywhere, anytime. New technological advances will provide even more mobility to workers, as well as other tools that will facilitate and automate jobs. In the near future, professionals will no longer have a single office location, instead they will have several.

People won’t be looking for an office, they will be looking for a network of office locations that they can use interchangeably.

Setting out major workspace trends for this year, Workthere’s Cal Lee argued that:

“The ability to offer customers multi-global locations and networked buying power can be a powerful selling point, and a major differentiator. This is becoming increasingly important as operators seek to future-proof their brand in a competitive – and growing – market.”

In this scenario, small independent operators might not be able to measure up and compete with those that cater to regional and/or international markets.

Shaping the future

In the coming months and years, we will see regional operators grow their footprint (Office Evolution, Premier Business Centers, Fueled Collective, Ucommune) and a selected few (IWG, WeWork, Knotel) expanding it globally.

Crossing borders isn’t easy for this industry; there’s a reason why there are only a handful of truly global operators. Working styles significantly vary among different cultures, language areas, and regions. Just think of ways in which the California and New York work styles differ. Operators hoping to expand either regionally or internationally need to keep this in mind when planning their growth strategy and determining which areas/countries they want to go to next.

The death of the small operator?

If professionals and companies will seek workplace hubs and networks, does this mean small independent operators are doomed?

Not necessarily, but competition between them will also increase and it will become harder for those operators to differentiate in a growing market. Small independent operators that want to succeed in the future will need to start thinking about the specific niche they want to cater to.

Niche operators have a key differentiating factor and they are better equipped to cater to their target audience’s needs. Some might look to merge with other small operators to create a new regional brand, similar to what Coco Coworking did by becoming part of Fueled Collective.

The industry is re-defining itself and evolving; small and large operators will need to adapt to new competition and market needs.

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Tags: CRE
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Cecilia Amador de San José

Cecilia Amador de San José

Cecilia Amador de San José, Senior Associate Editor of Allwork.Space, is based from wherever her laptop is. She enjoys traveling and visiting new flexible workspaces. If you'd like Ceci to check out your workspace, feel free to reach out to her at [email protected] (and send a plane ticket).

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