The pecking order of London’s flexible office market is changing. As WeWork works through its bankruptcy in the US and streamlines its property portfolio globally, Blackstone-backed The Office Group is left standing as the capital’s largest flexible offices provider, boosted by its 2022 merger with Brockton-backed Fora. With a rebranding now under way, chief executive Enrico Sanna is focused on what the future looks like for flex in a market where some landlords might be reticent to rally behind co-working.
In Sanna’s eyes, flex is now mainstream. “The difference between flex and non-flex has been blurring for many years but now I think it’s one category for the workspace,” he says, adding: “This is the modern way of working. People feel like flex is a bit of a niche for start-ups, but when you look at the distribution of our clients, the sectors they come from and the size, it’s completely representative of the [traditional] London office.”
These are confident words spoken in an uncertain market. WeWork’s specific troubles have built for years, and its bankruptcy was expected in many quarters. However, the struggles of the company synonymous with flex working could taint the industry for those outside it. Sanna’s push to keep The Office Group growing, then, comes at a tumultuous time for the sector as it attempts to show that worries over WeWork do not have to spread further.
One voice
Last week EG revealed that The Office Group is rebranding all its flexible workspace sites as Fora, just over a year after their merger. As part of the rebranding, all 70 TOG offices in the UK and Germany, which have been unbranded until now, will use the Fora brand. The Office Group will remain the name of the parent company.
The team says the move is an opportunity to combine two brands which were “hitting the right clients” but with mixed messaging. Doubling down on Fora lets the business talk to those clients with one refined, reimagined voice.
“Trying to approach [customers] with two different names and two slightly different value propositions was confusing the message rather than crystallising the message,” says Sanna. Simplifying the branding is “refreshing the message” of the companies post-Covid, he says, reflecting changes in users’ workplace habits as well as the rise of hybrid working, and underscoring the need for flex businesses to “tailor to people’s needs” in a crowded market.
Flex offices can help companies establish post-pandemic working patterns, Sanna says, giving people “the freedom to flourish” and “an ability to work in their own way”. A survey by the company found that more than half of workers under the age of 35 and 44% of all workers felt their performance being compromised by their work environment.
“You need to really think about how they work and what are their work styles and what kind of settings you need to have in an office to empower them to do their best work,” Sanna says of companies’ efforts to tailor their workspace to their workforce’s needs. “We try to boil down things on averages and generalise, but the workplace topic is way more complex. We are not all the same.”
Welcome competition
Complex and with nuance – the same can be said of the make-up of the flex office market. But the gap is only narrowing between traditional office space and flex market, adds Sanna: “What used to be the standard in the office space of 10, 15, 20-year leases has collapsed completely.”
Despite the increasingly blurred lines between flex and non-flex and the challenges facing some providers in the space, Sanna argues that the industry’s success is not inextricably linked to one company’s fate – even that of a business as high profile as WeWork.
“This is quite a young industry and it’s not just co-working – it’s operational real estate,” says Sanna, adding: “People want much more from their landlords or providers. Therefore, there’s a lot of growth to do that and there is room for everybody.”
He heaps praise on other players in the flex arena, including traditional landlords such as GPE and established flex businesses like IWG, for their unique value propositions. They create dynamism within the sector and make it “nicely competitive”, he says. “It’s about time that the customer gets choices, so I find that all of this is actually quite welcome,” he adds.
As for what the future of flex looks like, Sanna says trends point squarely toward branded operational real estate that mirrors the hotel sector. At The Office Group he is confident of sustainable growth – a mix of freehold assets and lease or management agreements with landlords and private backing is the key to success, he says.
“The mix of the model is the secret of our success and our sustainable profitability,” he says. “The fact that we’re backed by Blackstone and Brockton – I mean, who else would you want? They’ve been great partners and continue to push us to that part of the market where we think the growth is, which is this experience-rich, quality work environment.”
But he is clear that the company is not interested in a turbo-charged expansion. Instead, the team remains focused on strategic acquisitions that meet its criteria for a site that is well located, with good floorplates that can be compartmentalised into high-end work and communal spaces.
“We are well capitalised, backed by good investors and therefore we will continue to be on the lookout to expand our footprint,” he adds. “We are disciplined about how we go about this. It’s got to be the right asset in the right location where we know we’re confident that we can deliver our value proposition. Otherwise, no interest. Growth for the sake of growth is not our business.”
Next year The Office Group is set to open 180,000 sq ft of flexible office space in King’s Cross with Related Argent. The partnership is one of a few the flex operator has but it is looking to add a few more to its roster.
“What keeps it exciting is finding the partners, finding the great asset and then delivering it. And in order to find them, you got to go through a lot of [assets],” he says. “That’s what you’ve got to look at, five or six of them all the time.”
Despite uncertainty, Sanna remains positive about the outlook for flex and the wider London office market. “Covid helped to put a spotlight on the broken office but London has an amazing market,” he says. “The variety of offers and type of workplaces that people can have is second to none.”
To send feedback, e-mail chante.bohitige@eg.co.uk or tweet @bohitige or @EGPropertyNews
