We’re collectively witnessing a reimagining of the work experience, reconsidering the purpose, design and location of the office itself.
In light of the pandemic, many things about the co-working office model in particular seem especially flawed: utilities and resources are shared among many people, while new and different visitors are in and out of the building every day. However, though the past year has been a tough one for the commercial real estate business, there’s at least one bright spot in the coworking sector that disruptor Industrious is tapping for growth: flexible office spaces.
Since the pandemic, seven-year-old “workplace as a service” startup Industrious has found itself in an interesting position. On one hand, it’s technically in a category of industries that has seen a massive drop in business, along with airlines, hotels and gyms. On the other hand, however, there’s an influx of demand as workplaces of all sizes look for more flexible solutions to the traditional office space, driving a new partnership between Industrious and the massive legacy commercial real estate services firm, Cushman & Wakefield.
“In the short run, we’ve had to deal with the fact that a minority of Americans are actually going to the office and what that means for our business, but we’re moving very quickly to [a reality] where employees are going to have the option of where to go, when to go and how they work best,” Jamie Hodari, CEO and co-founder of Industrious, told CO—. “Most American businesses are trying to find a way to move towards a workplace model that requires partnership with a company like Industrious.”
Most American businesses are trying to find a way to move towards a workplace model that requires partnership with a company like Industrious.
Jamie Hodari, co-founder and CEO, Industrious
The outsourcing of the American workplace
The idea for a premium workplace-as-a-service provider struck Hodari while he was leading another organization, where he realized he would rather hold meetings with the company’s biggest funder in a nearby coffee shop than conduct them in the office.
“It was just infuriating that I felt more confident having the most important meeting in my life in a coffee shop than in my own offices,” he said, “and I felt like there were probably other companies that wanted to take advantage of the sharing economy dynamics and the benefits of a shared office, but wanted something they felt proud to call their own.”
Hodari compares the growth of the concept to the outsourcing that has happened across industries from manufacturing and logistics to customer service and data storage. However, he says, it’s not just about making the workplace cheaper or less operationally burdensome — it’s about dedicating the thought and resources to making the workplace better.
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Coworking evolves beyond a millennial trend
Pre-pandemic, coworking had been one of the major trends defining both commercial real estate and professional life for the millennial era, typifed by, of course, WeWork, but also big players like Regus Corporation and Knotel. The flexible space sector had been growing at an average annual rate of 23% since 2010, and was expected to account for 30% of the commercial office market by 2030, according to real estate firm JLL. However, coworking has been hit hard by the pandemic: According to Research and Markets data, the sector is expected to decline from $9.27 billion in 2019 to $8.24 billion in 2020.
For years, WeWork was the company that seemed to define coworking, expanding at a fast clip in cities around the world and outfitting its offices with millennial catnip like free beer, snacks and community events. Then, after a fumbled IPO last year, its valuation tumbled from $48 billion to $7.8 billion. Given WeWork’s very public struggles, for one, it begs the question: What makes Industrious different? Its model, Hodari says.
“On the supply side, we sign management agreements with landlords to manage portions of their building,” he said. Industrious then shares in a percentage of revenue and operates a stable, risk-mitigated business, according to Hodari. Currently, the company operates over 100 offices in 50 cities.
WeWork, on the other hand, signs leases with landlords in what can be a higher reward proposition, but a much riskier one, he said. Business can be robust in WeWork’s best performing offices where most of the space is rented out, but sluggish or nonexistent in ones with low occupancy.
How Industrious is leveraging partnerships to expand its real estate footprint
Hodari and the industrious team have encountered another opportunity as a result of the COVID-19 pandemic: Right now, there’s an enormous amount of unoccupied real estate available to be converted for a different use. Empty offices or hotels with low occupancy, for instance, may decide to convert a portion of the buildings to flexible workplaces.
“There’s all of a sudden an enormous number of spaces across the country that need someone to come in and manage them,” Hodari said, giving the example of a department store at the end cap of a mall becoming an Industrious workplace. “[There are] portions of buildings that are no longer going to be used for long-term leasing, so they need someone to come in and manage it. We’re the expert on how to do that in partnership with someone.”
Industrious specializes in forging these kinds of creative partnerships to help companies develop productive and efficient workspaces for an increasingly flexible workforce. Its biggest partnership to date, with Cushman & Wakefield, is designed to bring together a building’s workplace manager and property manager to deliver more seamless service. This means, for example, that a building’s security manager and workplace service manager would work together to present a more coordinated experience to employees passing through.
“From expert technical operations, to transparent reporting, to creating highly engaging tenant experiences, together we will drive greater value for owners and tenants,” says Marla Maloney, president of asset services for Cushman & Wakefield. Industrious’ expertise brings a lot of value to the larger firm’s properties, while the startup gets the opportunity to expand its business beyond its existing coworking spaces.
Foreseeing and fulfilling future needs via a ‘hub-and-spoke’ model
“I think, for a while now, the companies that have gotten workplace right have tended to be the ones that were very bottom up in their approach,” Hodari said. “And I think [COVID-19] has elevated the need for approaching the workplace from a point of view, first and foremost, about employee choice and employee empowerment.”
He imagines a future where employees are not just working from home more often, but choosing to work from a larger network of offices that may offer an option closer to home. He calls it a hub-and-spoke model: In New York, hypothetically, a company could have a main office in midtown Manhattan, with smaller locations in neighborhoods like Williamsburg or Crown Heights where employees may live.
The pandemic has illuminated just how different every employee’s needs are. Recognizing that workers with a private office would be more likely to go in, Industrious also developed a product called Oasis, a flexible membership plan that lets workers schedule and only pay for the days they’ll be in the office.
“If you’re going to build out a giant headquarters, maybe you do that yourself,” Hodari continued. “But if you’re going to have offices across the country, you need someone to deliver that for you, or you need to buy that from a platform. And Industrious is one of a small number of companies that sits at the heart of that transition.”
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Published November 24, 2020