US co-working giant WeWork has dominated the London scene since it first arrived in 2014 and now has 30 locations in the capital with more due to open this year, as well as six in Manchester and one in Edinburgh.
The firm, which recently re-branded as The We Company as it expands outside of commercial into residential, has operations in 37 countries from Argentina to Vietnam and is currently valued at £42 billion, making it larger than Airbnb and Ford and a comfortable No.2 behind Uber.
Its Vice Chairman Michael Gross recently said that it was the only serious global player in the co-working space market.
He also claimed it is now appealing to larger companies as well as the small tech start-ups, headphone-wearing freelancers and consultancies who have been the sector’s start-up staple.
But there is a British firm hoping to emulate its success that is already making significant inroads into the sector in London, at least. Uncommon has opened four sites in the capital since starting out also in 2014, including its latest and largest near Liverpool Street.
The co-working company has taken the whole of The Crosspoint, a cylindrical 50,000 sq ft office complex built by Lord Alan Sugar’s development company AMSPROP.
Its three other sites are in Borough, Highbury & Islington and Fulham and are all half the size of the Liverpool street building.
Uncommon has serious cash behind it. US investment giant The Carlyle Group has backed the company since 2016 and so far £120 million has been deployed at its four sites.
The company’s founders, Tania Adir and her husband Gal, stumbled into the co-working market pretty much by accident, she has told Dealmakerz.
After a brief spell as corporate lawyer at Allen & Overy during which the pair dabbled in apartment and later whole-house development, Tania gave up her day job after realising she wanted to work in a sector where she could ‘touch and feel’ the fruits of her hard work.
Crunch time came when in 2013/4 she and Gal bought a dilapidated warehouse in Highbury that they purchased speculatively with a plan to turn it into 20 apartments under Permitted Development rules.
Local planners thwarted this attempt and the Adirs were left with 20,000 sq ft of old warehouse, particularly worrying for them as its resale value was half what they had paid for it.
Their lightbulb moment came somewhat out of desperation; they needed to turn the opportunity around and decided to convert half of it into a flexible, co-working space and use the income to finance its future completion.
This may be only five years ago, but the co-working market was at an early stage of development.
The pair realised they had hit a potential goldmine when, after just three months, the space was 90% full. Their model, which is different to most of their competitors who lease spaces rather than own them, was born.
“We find it fascinating because it’s not just developing a building and then moving on; it’s operating and having a business akin to a hotel operation.”Tania Adir
The million-dollar question for anyone like the Adirs looking to expand in this fashionable office rental market, is how big will it get?
Tania says she aims to triple the square footage Uncommon operates by 2022 and that she reckons just 7.5% of London’s 250 million square foot of office space is held by co-working platforms, something JLL predicts will rise to 30% by 2025.
“It’s an ambitious target – but the idea that larger companies would go to co-working spaces has only been around for a few years and that’s where the growth will come from,” says Tania.
What’s driving this phenomenal potential growth is another matter. One explanation is that it’s down to both generational change among company owners and the difficulties of gaining planning for residential.
“The market is moving and there are more companies who are converting from a traditional lease environment into flexible spaces,” says Tania.
“You have had a lot of firms coming out of a recessional time and people wanted greater flexibility.
“The size of company is growing too. Our average client in the past has been one with four to ten employees whereas at our Liverpool Street location the desk requirements are a lot bigger at 35-40 desks.
“It shows a marked shift in company’s thinking – it’s not just the flexibility and length of term but also the service that a company wants to have; it’s that panic-free feeling where everything is provided and sorted such as internet, bike stores, showers, coffee shop and front of house.
“It’s a generational change in that they are understanding that unless you are a business of 200 or more employees there’s almost no point having your own office space that is self-contained in London because you get so much more in a shared co-working environment.
“We see the larger clients coming to us not just for six month licences but two or three year ones because of the services we offer them and also because they can expand without having to move office.”
Tania admits that her key competitor, WeWork, has been a huge driver in London in establishing the perception of co-working spaces as a creditable alternative to traditional leases.
“A lot of companies are still tied in for another three, four or five years so as they are released and consider the flexible offering, market share will build,” she says.
The different kinds of flexible, co-working style spaces on offer vary hugely, as do the prices.
Uncommon is in the higher end of the market competing both in terms of services and price with WeWork, but less publicised are the bargain-basement offerings somewhat lacking in the service and luxury surroundings offered at the top of the market.
“People are prepared to pay higher desk rates for the right quality space and location,” says Tania.
“Our key criteria when looking for new sites is a building with plenty of natural light that’s close to transport links.”
The Adirs’ strategies appear to be working, although they have a long way to go before they can rival WeWork. Nevertheless, their new Liverpool Street flagship space is already 25% full before its launch party, the pair claim.