Not for the first time - and certainly not the last - a commercial property giant has stepped into the flexible workspace sector, injecting yet more confidence into our industry.
On Monday (19th June), The Office Group (TOG) made headline business news as it emerged that US-based Blackstone, one of the world’s largest property investment firms, is buying a controlling stake in its company for a reported £500m.
The move is expected to fuel significant expansion plans for TOG’s portfolio, which currently stands at more than 30 buildings across Central London, Bristol and Leeds. Recently, the company gained planning permission to redevelop Tintagel House on Albert Embankment near Vauxhall, which at 92,000 sq ft, is set to become TOG’s largest flexible workspace.
Back to Blackstone, and TOG released an email communication stating its intention to expand their portfolio but otherwise to “stay the same” and retain their characteristic focus on “beautifully designed individual spaces”:
“The main change is that we have a new partner in the business. Blackstone, a US-based real estate investor, has acquired a majority share in TOG.
The impact of this is that we’ll have access to more buildings, through their investment and their portfolio, which will allow us to grow the TOG network and member community.
Other than that, nothing changes ... It’s the same people it has always been and that will stay the same moving forward.”
Many national news reports openly suggest that the rapid growth of flexible workspace and changing attitudes towards traditional workplace methods makes TOG an exciting opportunity for growth and investment.
But of course, those opportunities don’t stop at The Office Group.
This move could well open the floodgates for a string of new investment and expansion opportunities across our sector. This week’s announcement demonstrates that flexible workspace is big news, and Blackstone isn’t the first big-name investor to seek opportunities within our sector.
Earlier this month, US private-equity giant Carlyle announced a £150m investment in a new London coworking brand, Uncommon, involving the acquisition and re-branding of three existing workspaces and more on the way.
In May this year, it emerged that British Land, one of Europe’s largest property investment trusts, is setting up its own flexible workspace offering. And in February, real estate advisor Savills launched Workthere, a new brokerage designed solely for flexible, coworking and serviced office space. The list goes on.
After more than 30 years of growth, development, consolidation and evolution, the flexible workspace industry has come of age.
But that’s certainly not the end of our story. All things considered, our journey is just beginning.
This fresh surge of interest serves as a vote of confidence as the UK begins to navigate Brexit. Unchartered waters they may be, yet the UK’s extraction from the EU offers specific opportunities for flexible workspace operators as companies large and small seek the security of a flexible and serviced work environment.
Anthony Myers, Blackstone’s head of European real estate, sums it up neatly:
“We are excited by the opportunity [to buy TOG] ... The traditional workspace is being redefined in gateway cities across the globe, as evolving business practices increase demand for flexible office space to suit the needs of the discerning modern occupier.”
Indeed, operators can bask in this new-found attention and the inevitable opportunities that are coming our way. But we cannot rest on our laurels.
In an industry that moves as fast as ours, and especially considering the wave of interest from global property investors who are now jostling for their piece of the pie, it is more important than ever to stay ahead of the game.
Ask questions, listen to your clients, act on their requirements, and keep a sharp eye on the market. Competition is intensifying, and if you can’t (or won’t) accommodate your clients’ needs, your nearest competitor certainly will.
Those who attended BCA Conference this year will recall our final session, ‘Inside Out’, during which BCA Chair and Bruntwood Sales Director, Andrew Butterworth, interviewed two existing clients of BCA Member workspaces - Martin Johnson from Trans2 Performance based at The Deep in Hull, and Mudrika De Maria from Investment Mastery based at Kinetic Business Centre in Borehamwood.
Asked what they valued most about their respective serviced offices, both clients hailed the eagerness and ability of their hosts to accommodate their requirements - which included out-of-hours access and taking down walls to create a customised office layout.
Indeed, the ability to adapt quickly to client needs is one of our sector’s greatest strengths, and this will become mission critical as more operators and suppliers - especially global brands from traditional workplace backgrounds - enter our industry.
Today’s competitors are not like those of yesteryear. They are well-funded, structured, and backed by powerful investors. Your competitors are changing, and your newest neighbour could well be the product of British Land or Blackstone. To ignite for growth, you must be open to change, too.
Image supplied by The Office Group.