Several of the world’s biggest real estate firms are trying to work out what role flexible offices will have as companies encourage their teams back into the workplace – and how their own businesses can best benefit.
JLL chief executive Christian Ulbrich said last week that his teams believe flexible workspace will “become a meaningful proportion of the overall office leasing market”. But, asked on the agency’s third-quarter earnings call how he viewed JLL’s “largest competitors all making significant investments in that space”, he stood by the company’s decision not to compete directly with existing providers.
“We are helping [clients] to identify the right flex space providers,” Ulbrich said. “We are helping the owners of real estate to find the right flex space providers… and we are also operating flex space white-labeled for our clients. What we are not doing is we are not competing against our clients in the sense that we are creating our own brand or supporting a specific brand in competition with the others. And so that’s a slight difference in strategy, but we are very comfortable with the development of that business.”
Back to the desk
Other agencies have taken a different tack and used their quarterly results to shed light on how those decisions are panning out as occupiers return to the office.
At Cushman & Wakefield, chief executive Brett White described its strategic partnership with WeWork, a deal that included Cushman taking an equity stake in the now public company, as “very, very important” and “very strategic”.
“It is an exclusive venture where we are able to take the amazing technology and the amazing workplace experience tools that WeWork developed… and deliver them to our largest corporate and institutional ownership customers,” White said last week.
The chief executive said the agency’s largest corporate outsourcing clients – “multinationals with dozens, if not hundreds, of locations around the world” – will typically put their agency mandates up for bid every four or five years. “The largest of those transactions are needle-movers for us on profitability,” he added. “They matter a lot.”
The deal with WeWork will give Cushman an edge on such bids, White said, considering the questions that are “top of list” for corporate occupiers in deciding which firms to hire.
“First is ‘how do you help us get our employees back in the office? What is it that you can bring to us that is real and differentiated knowledge on what people like in the office? How do we make them excited to go back to work?’” he said.
“I think we can all agree that both old WeWork and new WeWork, there was no firm probably better on the planet at figuring that out. So we’re able to bring those experiences and those tools, those products and that knowledge to our clients on an exclusive basis.”
There are further benefits on the technology side, White added. “These very large corporate customers are [saying], ‘tell us exactly the analytical tools, the technology tools you have to help us better manage the workplace environment’,” White said.
“We now can bring in their technology, their experience, their knowledge, their AI on behalf and to the benefit of our largest corporate customers. This will be a clear differentiator for Cushman & Wakefield among the largest corporate outsourcing bids that we’ll pitch. That ability to pitch these corporate clients in a differentiated way and win more of those big customers was driver number one around this partnership.”
Voting with the pocketbook
CBRE chief executive Bob Sulentic is also bullish. Last year the company took a 40% stake in US operator Industrious and folded its own Hana business into that company.
Sulentic told equity analysts on a third-quarter call that the Industrious investment was “a significant hedge” against “some downward pressure” in the office market.
“But we’ve studied this flex dynamic over and over and over, and spent a huge amount of time with our occupier clients,” he added. “The general view is that they expect flex space to be a bigger portion of their office space used going forward than it has been historically and landlords are expected to be a fixture in their buildings in general going forward.”
With that in mind, Sulentic said, his team sees the outlook for Industrious as “quite bright”. “We voted with our pocketbook, as they say, when we invested in that business and we’re prepared to make incremental investments to support their growth – we’re quite bullish about what might happen with Industrious,” he said.
And for the office outlook more generally? “I interface with a lot of clients, interface with a lot of CEOs and talk to them about their plans in general,” Sulentic said. “They believe that getting back to the office in a significant way – not all the way back to where they were before, there will be hybrid work going on long into the future, but getting back significantly – is in people’s plans. And we think that’s going to impact our business positively.”
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