When Tishman Speyer launched its own coworking brand in 2018, longtime players such as Regus and WeWork dominated the shared space sector. Today, an increasing number of notable companies, including Hines and CBRE, are following the business model of one of the nation’s biggest commercial landlords.
Tishman Speyer’s first Studio locations opened in Boston and Los Angeles in 2019. Other spaces soon followed due to high demand, while the coworking sector was growing fast and operators were planning expansions at a higher speed than in previous years.
But free tap beer and Millennial décor are not everyone’s cup of tea. That’s where institutional landlords turned into space operators come into play, addressing the needs of those seeking amenities and services that focus on improving employee productivity and well-being. In the interview below, Tishman Speyer Managing Director Thais Galli explains why more and more companies are leaning on coworking spaces as satellite offices for their domestic and/or international businesses and shares her views on the sector.
How has the coworking sector changed? How do you see it now?
Galli: Since we’ve entered the coworking sector, we’ve seen the industry continue to rapidly grow. We’ve noticed smaller companies looking for a coworking space instead of subleases or spec suites. We’ve also seen more enterprise companies—including clients to which we provide traditional real estate—include flex office space as part of their holistic real estate strategy.
These enterprise clients have expressed desire for flex spaces for multiple reasons. In some cases, they want it included in the buildings they occupy so they can have a portion of their real estate be more flexible. In some cases, they want it in other locations for regional offices and in other cases, they want it for their full needs under our Studio Private platform, which provides fully serviced spaces dedicated to a single company. Going forward, we expect this growth to continue among new and more established companies and to become a larger part of the Tishman Speyer platform.
What does it mean for an office space provider to also be able to offer flexible workspaces?
Galli: It allows us to provide our clients whatever they are looking for—from a hot desk to a private office in a coworking floor to multiple fully built and managed floors, to traditional space that the tenant builds in the same property and/or across the world, all under one platform.
We are now able to provide space for companies of all sizes and growth stages, whether they are just starting up or are a global corporation. We can also support a greater variety of real estate needs, from satellite office, testing out a new market without large upfront capital investment, looking for overflow or swing space for employees and temporary teams, or looking to outsource their real estate function so as not to worry about managing their spaces. With the introduction of our conference center business, we are also able to provide companies with a premium space to congregate and hold events.
What are the challenges in the sector?
Galli: While we have seen more and more large companies join coworking, we think there is still much education needed to help some clients see real estate as more than just space and square footage. Flexible spaces provide more than just a physical place to work under flexible terms. Another challenge in the sector is providing companies space as they evolve and grow.
Describe the types of clients using your coworking spaces.
Galli: They differ by location and market, from established financial services, media and real estate firms to startup tech and retail companies. Many are familiar with coworking, some have come from traditional real estate and others are using Studio as their first office space.
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Tell us about the business strategy behind Studio. How are you planning to continue growing the brand globally?
Galli: Studio’s success is predicated on building a product that addresses a need in the market for beautiful, fun and fully serviced spaces that are also professional and elevated. We have always had a strong focus on hospitality and we continue to make this a focus throughout our platform.
When starting Studio, we interviewed multiple large and small companies to learn about the pain points in their current spaces, what they would want from a flex space and what it would take for them to use flex space if they had hesitation. We then leveraged Tishman Speyer’s expertise in design and construction, real estate operations and leasing to create a premium and differentiated offering.
You are targeting some undisclosed sites in Europe as your upcoming coworking locations. How do you identify new locations?
Galli: We leverage internal expertise to make these decisions. Our team takes a deep dive into existing and upcoming supply in the flex market, its penetration into the traditional market, whether we believe there is further runway for growth and how Studio would fit into the competitive landscape, as well as our presence in that market and the opportunities that our properties offer in that space.
Why do you think more companies are leaning on coworking spaces as satellite offices for their business?
Galli: We are seeing companies use our space as a satellite office if they are expanding into a new market and want to test that market before committing to a long-term space. Also, they will use coworking space if they have a smaller team and want their satellite office of employees to feel engaged by a broader community and professional network.
Additionally, companies are choosing shared spaces if they are entering a market they are not familiar with and do not want to go through the pain points of setting up an office—such as building a space, hiring services, hiring support staff—or if they already have a trusted partner providing a flex solution in addition to the traditional one.
The number of traditional landlords jumping into the coworking game is increasing. What is your view on the topic?
Galli: Many major landlords are witnessing their tenant base look more and more to flexible space, but very few are doing it in-house as we are. They are starting to realize that coworking is not a trend, it’s a market shift.
How do you see the coworking sector going forward?
Galli: We think that flexible office space will continue to grow and gain more popularity and trust, especially amongst enterprise clients. We expect investors, lenders and others in the industry to become more comfortable with the product. These trends we are seeing will continue. Office space is no longer just a place to do work, but a key component in a company’s real estate strategy and employee experience.
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