From retail warehouses to lacy boudoirs, Richard Pearce has made a career out of dealing with unusual spaces since his days as a DTZ surveyor. Now, as the head of workspace specialist TCN, he plans to use the rise of start-ups to grow the company’s profit five-fold by 2018. Emily Wright finds out more
Before you even make it inside Piano House in Brixton you hit one of the workspace warehouse’s newest tenants. Federation Coffee is nothing more than a window in a brick wall. The insides of the shutters double up as blackboards covered in a pleasingly messy scrawl setting out the day’s menu. The space is tiny. The lease is uncomplicated. The brand is cool.
Welcome to one of London’s trendiest workspace hubs. Piano House is a 40,000 sq ft warehouse filled to bursting with nearly 60 of London’s most creative and innovative young companies from Florence and the Machine’s management team to a vegan cupcake business.
The man behind it all is Richard Pearce. In 2006, aged just 30, he headed up the UK launch of TCN, a Dutch property group set up in 1993 specialising in unusual commercial space. He has since kept the British part of the company afloat after the parent group succumbed to the recession in 2012.
Now he has ambitious plans to grow the group’s EBITDA from £1m to £5m
in the next four years by expanding TCN’s 400,000 sq ft portfolio in the UK to around 1m sq ft and to increase the value of the portfolio from £40m to £100m in the same period.
Here the 37-year-old explains why now is the perfect time to grow, why he will avoid the security of anchor tenants at all costs and how his bold expansion plan has been fuelled by the recession as it helped to kick off a period of innovation-led growth for the SMEs and start-ups he works so closely with.
From boring to boudoir
“It’s fun when investors and the guys from the banks come to this building and hold their serious meetings here,” laughs Pearce, looking around the Amsterdam Red Light district-themed meeting room in his own workspace in Piano House. It is a nod, of course, to the Dutch parent company that went into administration two years ago, leaving just the UK business, headed by Pearce – who started off his career as a surveyor at DTZ – to continue the brand name.
“DTZ was OK, but I wanted to do asset management so I moved to Shaftesbury in 2000 to help bring the right brands to Carnaby Street,” he says.
“Within a year I went from being a surveyor advising on retail parks in Leicester to going into a board meeting to pitch a concept store for girls to have vintage makeovers in a Victorian-style boudoir. I had no idea about that, obviously, but it was great for experience in asset management, brand awareness and more creative industries.”
From vintage lace to cold hard figures, Pearce made another strategic move in 2004 to Europa Capital to get some financial experience under his belt and, in this role, was introduced to TCN. The rest is history and by the end of 2006 he had made his first purchase – Piano House – which has been nigh on fully occupied almost every day since.
Pearce has already doubled the size of the UK portfolio from 200,000 sq ft in 2011 in London and Bristol. But now, with the tech and creative companies he so often caters for not only starting up more regularly, but growing faster, the time has never been better for expansion.
Gearing for growth
Pearce’s expansion plan will be to infill gaps in the portfolio in existing locations including London and Bristol and to also look further afield for space in Leeds, Birmingham, Oxford and Cambridge.
“We will not set out to raise £1bn through a fund,” he says. “That isn’t what we do. We are location specific. We will keep our assets for a long period and will build on them.
I am basically trying to create my own version of Shaftesbury that is not confined to one location.”
He says the immediate strategy includes expanding Piano House and talking to planners about adding 30 homes to the roof of the group’s 40,000 sq ft Bristol flagship Temple Studios.
“When you take an unloved area and rebrand it, it then suddenly becomes more attractive and the resi values soar. Just look at the meatpacking district in New York. And cheaper resi is good too – for those 25-year-old computer geniuses with no money.”
As for more general growth and new sites across the country – the demand has never been more acute for
the sort of space TCN specialises in.
“The recession blew apart the traditional occupier market in some areas and created a lot of room for smaller creative companies and entrepreneurs,” says Pearce. “This, twinned with the rise of technology, helped kickstart the emergence of a new sector and now the market is improving. The TMT sector – as the property pigeon-holers insist on calling it – is maturing.
“Having said that, many of the firms we look at do have a limit on how much they can pay. And that was certainly much more the case a few years ago. We can always get £12-13 per sq ft net rent. That’s easy – every day of the week. That is actually more likely to be £17 per sq ft in London now. But up to 2010 in Piano House we saw rents holding up on small spaces, but anything more than 800 sq ft was very difficult to fill and you would get badly hit by empty rates.”
Pearce says that as those sectors which TCN targets – tech, media and creative – continue to mature, that situation is changing.
“These firms are growing so fast that they need more space faster, and we can let up to 5,000 sq ft off decent market rents without too much problem,” he says.
Avoiding the anchor
Even with such an ambitious expansion plan – and one that is already under way as TCN has bought two 40,000 sq ft buildings for around £3m each in the past six months alone – Pearce says he will never be tempted by the security of an anchor tenant. And this is also the reason he does not see too much in the way of competition from bigger developers as they look at the success of the workspace concept.
“It is not just creatives who are looking for trendy office space anymore,” he says. “It is the likes of the PwCs and the National Grids. And so the property industry is finally realising that this is not a sideshow. Trendy, innovative office space can make some serious money. Big developers float into this arena but unless you are set up to run, brand and market small creatives then it is very difficult. Developers drift in but then a big firm comes along and the developers will cave in and just let the lot to a safe tenant and then the whole things falls apart.
“We do not want to let 80% of the building to someone. That will mean that company’s employers and branding will be everywhere. It will dominate. People say now: ‘You work at Piano House’. That is because we don’t have a dominant tenant. Otherwise people might say, for example: ‘You work in PwC’s building’.”
Pearce confirms that TCN will stick to its own classic requirement – 40,000-100,000 sq ft with individual desk space up to 15,000 sq ft units for bigger occupiers.
The company has thought about moving into co-working proper in the West End with its Piano Club concept – the more informal co-working side of the business where companies take desk space rather than individual, contained units – but Pearce says that, for now, rents are just too high.
“They are off the scale. It is hard to make reliable margins in the creative sector with such astronomical rents. I would look away from London and build up the businesses in areas with easy access to London where our target occupiers will actually be able to afford to live,” he says.
But could this be the problem? The fact that without an anchor tenant and a long lease the TCNs of this world will gradually be pushed out of the mainstream by those big developers who want a piece of the action?
“No, because a lot of those companies do not recognise what start-ups and young businesses need. What we do is aligned to young CEOs and entrepreneurs and that is why I see our revenue growing from £1m to £5m. I agree there is a lot of noise around TMT and it will plateau: how many times can you reinvent Snapchat or Whatsapp? But that does not change the fact that the way we work has changed, and our buildings cater to that.”
And if that means a hole in a wall for a tiny space and an uncomplicated lease for a cool brand – chances are that Pearce will be able to help.
