Coworking Execs Foresee Industry Consolidation

 

 

The massive growth of the coworking industry in recent years has come from a wide variety of companies, including small and large providers, but executives at several coworking companies expect major consolidation in the industry in the coming years.

Bisnow: Jon Banister

10Square’s Mitchell Schear, MakeOffices’ Zach Wade, Convene’s Michael Burke, WorkReady Suites’ Austin Flajser and Industrious’ Anna Squires Levine

Industrious, a large New York-based coworking company with over 50 spaces in 33 cities, in August acquired Assemble, a Chicago-based coworking provider with three locations. Industrious General Manager Anna Squires Levine said she expects many similar acquisitions will soon happen in the coworking industry.

“I think we’re seeing the beginning of consolidation, larger global operators purchasing smaller local operators,” said Squires Levine, speaking on the coworking panel at Bisnow‘s Greater Washington State of Office event Wednesday. “I think the endgame is a handful of top players who offer something complementary and slightly different.”

Bisnow: Jon Banister

Convene’s Michael Burke and WorkReady Suites’ Austin Flajser

WorkReady Suites President Austin Flajser, also president of Carr Hospitality, said he envisions the coworking sector charting a similar course as the hospitality industry. He gave the example of Marriott acquiring Starwood and bringing dozens of hospitality brands under one umbrella.

“I think if you look at the hotel model, you see we have some larger brands, some of which have been there and some of which are merging and still offering core offerings with some variability within them,” Flajser said. “You’re going to see some powerful [coworking] brands through mergers and acquisitions and you’ll see stratification within those brands.”

Today’s coworking sector has largely blossomed during the current economic expansion, and many companies have yet to weather a recession. Convene Vice President of Real Estate and Development Michael Burke, whose company offers meeting and events space and is moving into the coworking sector, said coworking companies are looking to consolidate to ensure they can stay healthy when the economy is not booming.

“There are a lot of companies in the three-to-10-location phase looking for additional capital or other scenarios, so I think to some degree the race is on,” Burke said. “You need scale to survive a downturn.”

Bisnow: Jon Banister

MakeOffices’ Zach Wade and Convene’s Michael Burke

A D.C.-based coworking provider that has been scaling up, MakeOffices now has 14 locations in three cities, including nine in the D.C. area. MakeOffices CEO Zach Wade said the relative scale of industry leader WeWork has caused him to lose sleep.

“I wake up often thinking about WeWork having an entire container ship of goods and services coming into the U.S. that costs 10 cents on my dollar,” Wade said. “Scale and operational efficiencies at the end of the day will become more important. As there are more customers, there is more demand.

“The margins started out pretty juicy in the business in the very early days, but that gets compressed and you have to make your margin on scale. So we’re going to see a lot of consolidation.”

 

 

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