Philip Grace is looking slightly sheepish. The chief executive of i2 Office has just popped out of the company’s London Mayfair centre, nestled on the top floors of Jones Lang LaSalle’s building at 22 Hanover Square, W1, and returned with a “proper” coffee shop coffee. To be fair, the beverages from the bright, communal i2 galley kitchen-cum-breakout area are perfectly quaffable, but barista-style they are not.
If Grace has qualms about his hot drinks, they certainly do not extend to the plans for his business. Direct, yet friendly, he is in some ways an archetypal Yorkshireman, though he has been living in his adopted home of Milton Keynes for more than a quarter of a century. And it was the Buckinghamshire town that the Huddersfield Town supporter chose as the location for the first i2 serviced office, which he opened in 2009.
Since then, the company has rolled out 16 more centres in most major UK cities, including a recent signing in Birmingham’s Brindleyplace. More centres are in the pipeline, though not in the quantity and quality originally envisaged. Only two years ago the company was pushing ahead with plans for up to 50 centres across the UK. Now the talk is no longer simply about numbers. The focus has shifted to the development of sub-brands and consideration of centres outside the UK.
Policy shift
Grace is disarmingly open about the policy shift: “Perhaps naively, I thought 50 buildings would be great. Now it’s clear to me that to do 50 straight i2 offices is wrong. Many regional markets haven’t recovered, nor will they do for a long period of time, so it would be foolhardy to do a lot.” But deciding not to follow in the footsteps of a big-brand competitor hasn’t meant giving up growth ambitions, just rethinking the proposition.
The solution: diversify the brand. Later this year, the core i2 Office offer, a grade-A product, will be joined by i2 Metro.
Grace defines this as: “Either a grade-A office in a grade-B location or a grade-B office in a grade-A location.” It is, he reckons, the answer to areas, including whole towns, that will never suit a standard grade-A office. One of the first Metros is likely to be in Birmingham (see box).
Further i2 variations expected to launch this year are i2 Managed, for large amounts of space, and i2 ECO, a prefabricated business village concept targeted at SMEs. Others may follow. Grace admits: “I would love to do something with transport links.” Although fellow serviced office provider The Office Group signed a deal with Network Rail in 2011 to open offices at major London stations, Grace maintains there is still potential for i2 at airports and railway stations across the UK, though not motorway service areas. And he is thinking even further afield: “I don’t see the UK as a barrier. We won’t rush into Europe, but there is definitely growth potential in Asia and the Middle East.”
Anyone tempted to dismiss Grace’s aspirations for i2 as mere pipe dreams should first consider his track record. The 51-year-old chartered surveyor has a solid and diverse track record in property, including setting up a residential property management company in Milton Keynes, which his wife now runs, and developing commercial buildings in Manchester and the Isle of Man. And he also served what he terms his apprenticeship when he set up and ran competing serviced office operator United Business Centres.
Deep pockets
Grace isn’t the only one who believes in his vision. After funding the first three i2 centres himself, in 2010 he raised £1m equity from global facilities management provider OCS (which now has a 30% stake in the i2 company), insurance underwriter Hampden Group (11%) and two private individuals. The potentially deep pockets of the minority shareholders have given i2 serious credibility in property circles. The company, which directly employs just 20 staff, will, it claims, achieve a turnover of £16.5m this financial year, and expects to almost double it, to £30m, in 2014. By then, says Grace, the company will be in a “profitable position”.
In the meantime, Grace maximises his working days by travelling across the UK by train rather than driving, even if that means he sees more dubious railway catering than he’d like. But it’s not all work: later this month, he’ll head for the slopes of Whistler, Canada, for a three-week skiing break. He’ll be taking his eldest daughter, 24-year-old surveying graduate Abbi, who before landing herself a graduate trainee place at Cushman & Wakefield in London, worked in Whistler as a ski instructor. He sighs: “I may get a few lessons, but it’ll be an expensive way of getting them.”
Eyeing up the West Midlands
As well as striking one of the largest office deals in Birmingham last year, the transaction also marked the opening of its first serviced office in Birmingham at Three Brindleyplace last December, i2 Office has plans for two more in the city and is considering the potential of other West Midlands locations. i2 chief executive Philip Grace isn’t fazed by the fact the company moved into space at Brindleyplace formerly (before it was refurbished) occupied by competitor Regus. Or that the serviced office market in the UK’s second city has become something of a bloodbath (his word) in recent years, with workstation prices falling as low as £150 per month.
“We understand Birmingham,” he says, “and recognise that we need to satisfy two distinct client bases: Brindleyplace, which is a key financial location, and the traditional city core.” So, a second i2 Office of around 20,000 sq ft will open later this year in the Colmore Row district. “That will be it for us for grade-A space,” Grace adds. But not necessarily for the company.
This autumn i2 plans to roll out sub-brand i2 Metro in sub-prime locations or buildings and Birmingham is likely to house one of the first. Grace suggests that Edmund Street would fit the bill well, though he insists that no deal has been struck. “The only thing holding us back in Birmingham is finding the right building with the right landlord in the right place,” he says. Ticking those boxes is crucial to the firm delivering deliver lower workstation prices – around £200, compared with the £300 cost of i2’s standard grade-A offer.
The flexibility of the Metro format means that locations outside Birmingham are also in the frame, including Aston Science Park, Coventry and Wolverhampton. But i2 isn’t after straight lease deals. Grace explains: “We’re looking for long-term joint venture partnerships with landlords who have multiple sites across the UK.”
