Industry figures say the broker model needs to improve and adapt to an increasingly digitised flex office market and growing flex operator brands, after WeWork owner Yardi’s regional director called to “disintermediate” brokers.
Justin Harley, regional director for co-working and residential at Yardi, the majority owner of WeWork, called for the sector to cut out the middlemen to improve efficiency and cut costs at the annual Flexible Space Association conference earlier this month.
He said: “Someone said to me, ‘How come we have to pay these fees and they don’t do a lot?’
“It’s become the Wild West out there and I think the industry has to do something about disintermediating the brokers… that will help everyone. That will help your margins, which helps generate cash, which will help you be more operationally efficient.”
Aware his comments could provoke a response, he added: “Sorry brokers in the room.”
And, indeed, draw a response it did.
“It’s so poor from them (Yardi), especially considering they’ve just bought a brokerage… they’re the wrong comments because you’re just adding fuel to the fire,” said Jimmie Brennan, founder of flex brokerage Love Mondays Office Space.
Smell the coffee
But while he disagreed with the way the message was delivered, Brennan added that he did not necessarily disagree with the underlying sentiment.
“I brand myself as the anti-broker. I am against the way in which brokers currently operate. I’m the most anti-broker broker you’ll find because I think that 90% of the broker market is doing it wrong.” he said, adding that he hoped “brokers wake up and smell the coffee”.
“They [brokers] are literally ringing up providers going, ‘It’s easier for me with 15% [commission] over the road, he’s offering me 20% over the road, will you match it?’, and the provider feels obliged to say yes,” he explained.
He said, however, that providers were partly to blame for the state of affairs, due to the structuring of their incentives for brokers.
Instead of “giving comms [commission] away” as a set rate for completing a transaction, he said providers should link commissions to the performance they want from their brokers, incentivising through, for example, volume-related bonuses.
“Make it based on what it is that you need to achieve,” he said, “whether that’s the number of desks, whether that’s the length of contract, whatever it is. But that’s what you have to tie it to. If you just give away everything, people are going to take.”
And to brokers, he said: “Take this as the warning shot and start behaving better and demanding better of ourselves and each other. Let’s work together. Let’s get our relationships on track.”
Brennan also said the threat of disintermediation is not necessarily solely down to issues with the service brokers provide, but also the growing brand recognition of flex providers which allows them to generate leads themselves.
Zoe Ellis-Moore, chief executive and founder of Spaces to Places, a brand and marketing consultancy for flex operators, who shared the stage with Harley at the flex conference, said brand strength was a key determinant of success.
Ellis-Moore said: “In an era of destination workplaces, we’ve moved beyond soulless and faceless offices.
“Today, brand strength and portfolio size as well as direct connections with end users are paramount, as Google’s evolving algorithms favour providers with credibility over aggregators and brokers.”
Pointing to her recent Spaces to Places 2025 flex study, Ellis-Moore said the data showed website traffic to major London flex space aggregators had decreased over the past two years, while providers had gained.
She added: “Looking ahead, success will belong to those who build a fanbase through transparency and consistently delivering. The strongest market players will be those delivering at scale with portfolio of 12 or more locations.”
Caleb Parker, founder and former owner of co-working business Bold and now founder and chief executive of repositioning company Brave Corporation, agreed: “I think the disintermediating opportunity or threat is brand.
“As much as WeWork paid brokers commissions, they got a lot of direct business. People would bypass brokers because people knew WeWork. They just knew the brand was strong.”
Parker said he did not necessarily think technology and automation would “disintermediate” brokers, adding: “The broker’s value is going to shift, so it’s not disintermediating them.
“I like to make the comparison to taxi drivers,” he said. “Before Uber came, they had The Knowledge. The taxi drivers have the knowledge of every single road.
“And so the brokers, they have the knowledge of the different landlords and vacancies – that knowledge has become ubiquitous.”
As a result, instead of using their tools to access transactions, Parker said the value brokers bring changes to focus on negotiating flexibility, focusing on their customers’ needs and managing their real estate requirements.
“They have to really understand what the customer wants, their workplace strategy and so forth. The broker has to take the customer by hand, say, ‘We got your back, we know X, Y and Z. Let us look at the whole puzzle and help you manage that’,” he said.
Ashley Diamond, chief operating officer of central London-focused managed officer provider MetSpace, also struck a more optimistic note, defending the role that brokers play.
Diamond said: “Brokers have been championing the cause for the industry for as long as there’s been an industry, and deserve a seat at the table.
“But,” he added, “they have to offer a top level of advisory service, a strong understanding of the market and the different offerings. It is a competitive environment, and gone are the days of phone-bashing and transactional brokerage. Relationships are key.”
Image © Adrian Pope
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