Tishman Speyer is opening its own flex offices without go-betweens like WeWork. We got a look at the landlord's new space in New York.
A new flock of landlord-operated flex spaces, including Hines' Hines Squared and Boston Properties' Flex, are entering the market.
- Business Insider toured one of these spaces, operated by Tishman Speyer's Studio. New York's fourth-biggest landlord is operating several flexible office space across the globe.
The company offers hot desk space as well as private office space for small and medium companies. It also provides full floors for larger companies that want to outsource their office management needs, echoing WeWork's move into the enterprise business.
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Coworking and flex-office space hit the big time this year, thanks to a mix of hype and front-page controversy.
WeWork's failed IPO has brought a wide range of naysayers, while those in the industry say that WeWork's story has more to do with bad governance as opposed to a broadly unsustainable industry.
With all the talk of lease arbitrage, managed partnerships, and other approaches, an outside observer might ask: why aren't landlords doing this themselves?
There are those in the flex office world who say that landlords, used to collecting rent checks, keeping the elevator running, and little else, don't have the mixture of operations and hospitality experience needed to run a flexible office space.
But a new flock of landlord-operated flex spaces, including Hines' Hines Squared and Boston Properties' Flex, are challenging this view.
Business Insider toured one of these spaces, operated by Tishman Speyer's Studio. New York's fourth biggest landlord now has seven open flex-space locations around the world and at least five more being built.
The firm has also leased space to WeWork since at least 2014, and partners with other flex-office providers. The decision to launch Studio just over a year ago was made so that the company could keep its "direct relationship" with clients, Thais Galli, managing director at Tishman Speyer and head of studio, told Business Insider.
"If the market is shifting and our clients are looking for something else, there was no reason why we wouldn't start to offer that something else as well," Galli said.
Studio is open in New York, Boston, Washington DC, Chicago, Los Angeles, and Rio de Janeiro, with locations opening soon in Berlin and Sao Paulo.
The New York location I visited has a lot of black and brassy finishes, which Galli compared to the bright colors of the Los Angeles location. The lounge furniture, including a brown leather Chesterfield sofa, conjured up images of old New York, while the Berlin location will use more modern furniture.
The conference rooms in each Studio location are themed. The New York location boasts a homey Brooklyn Heights room and a sleek Chelsea room.
The company offers hot desk space as well as private office space for small and medium companies. The company also provides full-floors of office space for larger companies that want to outsource their office management needs, echoing WeWork's move into the enterprise business.
Landlords who are renting out space directly to a flex office company aren't typically sharing in the upside when things are good, but they share the same downside when times are bad (namely vacant office space that doesn't make money.)
"During this economic growth, there's a lot of upsides," Galli said. "During a downturn, there are risks as well. So if we're going to have the risks, we want to make sure that we're keeping the upside in-house as well."
But the company won't be rolling out Studio into all of their properties. Tishman's investors are the most important consideration when deciding where to put in a Studio space.
"We always sit with our investors, and ask for their blessing as well," Galli said.
Separately from our tour of Studio, we spoke with Ben Munn, JLL's managing director of Flex Space globally, who also highlighted investors as one of the most important factors for landlords considering operating flexible space. He noted that it's important to determine whether a building is a "long-term position" or if a landlord just filling in gaps. If it's the latter, it probably makes more sense to just lease the space out to a typical flex office operator.
"We really have a lot of properties that we consider long-term holds and we are not only the owners but also the operators," Galli said.
This combination of owning and operating has Tishman Speyer thinking about Studio not only as a business of its own, but also as a part of a building's full ecosystem.
"If I look to my core customer base and say I want to provide it as an amenity, I don't necessarily need it to generate direct market rents if it provides conversions and renewals in the rest of the building," Munn said.
And Tishman Speyer views some of the startups that may begin as Studio occupants as the potential anchor tenants of the future.
"It's a great entry door for them to get into our properties," Galli said.
While it's definitely possible for landlords to operate flexible space, Munn said that he doesn't "think it's easy to do it well."
"If they're going to build their own operating business, they have to understand that this is a customer-oriented operations," Munn said. "It's not about managing arm's-length relationships."
Galli said that Tishman Speyer's Studio is still a big change for the company.
"What's changed is that when you do coworking ... is that you're really in there everyday," Galli said.
She says that the business shifts from real estate to hospitality and that the team has to adapt by hiring staff with hospitality experience.
Galli said she also had to learn a lot more about design, especially design that is adaptable to current trends. She said that almost none of the build out is permanent: Studio uses demountable glass partitions instead of traditional walls and no fixtures or furniture are built-in except for the cafe bar and the pantries. She said this allows the company to switch layouts as people's preferences change.
Technology is used to study space usage and to connect clients to each other and the building's amenities.
Conference rooms are outfitted with sensors that track usage, and Wifi signals allow Studio to differentiate common space usage between hot desk users and those who work for a company that rents office space.
The company has two tenant experience apps. One, exclusive to Studio members, allows them to book conference rooms and desks across all of Studio's properties.
The other, Zo, is an amenity app that all Tishman Speyer tenants can access. Zo connects Studio members to events, services, and interest groups within the building.
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