Co-working and the tech industry – Where next ?

Juliette MorganCushman & Wakefield

Global Tech Team Lead - London

Outline

• Co-working in London• Definitions in a blurry world• The needs of tech companies/What co-

working provides• Trends – Second Home + We Work• Developers use of co-working/OaaS• Emergent and international comparisons• Future prospects for co-working

Co-working London

By the numbers – the drivers

• 4.6m in UK are self employed – higher than records began

• In London 740k self employed – or 1 in 8• +28% - Microbusinesses 73k-94k• Gen Y demanding flexibility in location, culture and

collaboration• Corporates chasing innovation – internally and externally

– accelerators, embedded teams, sponsorship, venturing• £’s per desk, not £’s per sq. ft. • Low/no commitment

OaaS - definition

• Co-working – open plan, shared space, usually ‘roaming members’ who pay for access to a desk but not dedicated – av. price £350

• Serviced offices – managed serviced space, hospitality driven, rate per month for personal space. – Av. Price £550

• Accelerators – programs to develop corporate growth, usually with applications and time limited. Often embedded in Serviced Space. - equity for £’s

Where are the techs? - London

Where tech firms are looking – Hubble

Co-working competition - Transparency

Why co-working matters to tech

Yeah, but can they pay the rent?

What do they need from offices?

• Flexible lease length• Low/no deposit• Ability to expand/contract• Plug and work• Connectedness• Attract talent• Credibility• ‘acceleration’- a network that speeds up the business• Culture

What do they get in co-working/OaaS?

• Networking• Furnishing/fit out• Smooth predictable cost• Cost and flexibility - bundled• Expand and contract• Co-operation• Events• Community• No commitment• Design quality• Brand expression• Talent attraction

The role of accelerators in co-working

• Provide pipeline of new companies• Animate the space• Attract angels, venture capitalists and the right

community• A differentiator – e.g. industry specialism • Underwrite finances e.g. Corporates paying for

space (Barclays/Techstars/Central Working

Second Home – A New Trend

Work + Life

• “offices need to be places where you can relax as well as work, because you’ll probably be spending more time in there than your parents did”

Second Home

Curation

• Community• Wellness• Brand• Vibe• Informality• Credibility• Support services• Diversity

Wellness

Nourishment

• Great onsite food – breakfast to bar, £5 lunch• A program of speakers to inspire – Branson, McCartney,

Lord Rees, Osbourne, Rogers, Morazov• Meditation, yoga, pilates, running• Personal controllable environment; lighting,

temperature, choose a chair• Hospitality vs. Security/hosting• Volume, light, environment, nature (gets hot and cold)• Raw, authentic, not over designed• Plants/biophilia

The Economics

• Revenue from F&B sales – especially when animating a lobby (loss leader space)

• Event revenue• Co-working revenue• Desk rent revenue• Sponsorships / brand agreements• Meeting space hire

The Services

• Reception• Phone line• Internet• Furnishing• Break out space• Meeting space• Printing• Curation

We Work – Amazing! • £5bn global market cap! – Goldman & JP Morgan• March to IPO.....• 6 sites in London, more in pipeline• 4 years old! • ‘members’ not ‘tenants’• Beer on tap, beautiful fit out, private offices• ‘physical social network’ – the value is the

members• Start ups, corporates, everyone in between – an

ecosystem

How developers are using co-working....

• Animate the scheme• Bring credibility• Attract large corporates to high growth start-ups• Manage it directly – e.g. Hello Work (Allied London)• Provide pipeline – e.g. Canary Wharf – changing

tenant mix• Brand building• Swing space for occupiers e.g. Office Group at

White Collar Factory

International Examples

• Rocket space – San Francisco • Galvanize – San Fancisco, Boulder, Seattle• 1871 - Chicago• The Porter - Sydney• Cambridge Innovation Centre - Boston• Neuehaus – New York + London• Soho Works – London, Istanbul, Los Angeles• Spaces -

Future of co-working

• Facial recognition tech• Occupeyes – real time occupancy• Data on social interraction (higher value seats in

co-working?)• Floorplans with identity• Social occupancy impact• Real time occupancy cost – liquid space? • A tech bubble? Regus round II? • Priced into new locations

Conclusion

• Trend unlikely to go away – 10% of market? • OaaS is a critical piece in place making and attracting

corporates – balance of new and old• OaaS are hoteliers of office space, and taking lease risk to

break down real estate offers to growing companies in a way they can use

• Covenant security questions • Watch the investment – tech bubble vs. freelance/company

formation in a downturn• Corporates using access to co-working for innovation

agenda

Thanks

Juliette.morgan@eur.cushwake.com@Juliettemorgan