“We allow companies to focus on their core competencies and not waste time shopping for office space or figuring out how to wire phones and establish an internet connection. This helps them scale their business — spending more time focusing on what they do, not where they are going to put their next employee.”
Insightive.tv: How would you classify your workspace business?
Patrick: I think a coworking space in the best catch-all phrase to describe what we do. We generally don’t do any contracting for a term over two years. But for anything from day use, all the way up to a two-year-contract is common practice for us. A lot of our tenants operate on a monthly basis — but it varies between location.
Insightive.tv: What are the key market forces affecting your business at the moment —how do you expect your workspaces to perform this year when compared to 2016?
Patrick: I think this is going to be a great year. We have already seen a lot of activity and demand, even within just the first few weeks of January. There is always uncertainty surrounding the transition of power between Administrations following an election, and this year is certainly not an exception. Although Trump has not given too many specifics about policies, business confidence remains relatively high. It is likely that corporate tax rates will go down, and Trump has certainly expressed the sentiment that he will create a business friendly environment, which has done a lot for the confidence of start-up companies and small business owners.
We are going to keep the pressure on, expand our revenue throughout the year and keep an eye on potential new opportunities for expansion. We are currently undertaking a significant construction project in downtown LA. This is part of an interesting commercial redevelopment project in the fashion district involving old factory buildings that are being converted into retail, lofts and commercial space. Our current portfolio is relatively focused on southern California, but we do have one location in Honolulu — Hawaii. Nothing is yet set in stone, but we are looking seriously at expansion into northern California and other urban markets in the US.
Insightive.tv: What do you see as potential challenges moving forward this year and what challenges have you historically seen running your workspace?
Patrick: Although, we do run long term contracts, one of the default challenges in our business is the uncertainty inherent in short-term contracts. It is always possible that on any given month a large portion of our tenants will give notice for completely unrelated reasons. But, generally, this can be mitigated through high occupancy rates. Across our 11 centres, we are running upwards of 90% occupancy. This allows us to remain confident that even if we lose multiple tenants at any given time, we will have a base that remains.
We have also found that there is ever growing competition within the coworking sector. But this is partially an effect of a growth in demand and an increase in the potential market. People that have been operating from home are becoming aware of the different flexible workspace options that exist. Larger companies are also coming to understand how our services offer them flexible options that can be used in tandem with traditional office space to save them money. Salespeople, for example, often don’t spend much time in an office anyway — it’s not entirely necessary for them to all have full-time space, and larger companies are coming to realise this.
This mixed approach taken by larger firms is creating a much more secure business model for companies like ours. In the event of a recession, for example, even if smaller firms have to relocate back into homes, larger companies, looking to save money, will be inclined to invest further into flexible workspace options. This diversity of clients creates a more robust market.
Insightive.tv: What are the main differentiating factors between you and your competitors?
Patrick: One of the big factors that separates us from a lot of other companies engaged in flexible workspaces is that we invest heavily in private offices. Although we have large open areas, our bread and butter comes from companies that want private office space and this is something we plan for in site construction. We find that most companies, even those who want a dynamic and social work environment, prefer to work in their own private offices. Catering to this market also aids our ability to draw in larger companies looking to replicate their traditional offices on a more flexible basis, along with smaller companies that simply prefer this approach.
But this is not to suggest that we forgo investments in either community engagement or services. Last year we launched an online community — essentially a social network for job members that includes a directory and the ability to post classifieds. We also make sure to maintain more traditional social media activity. We sponsor networking events at our spaces, provide happy hours and bring in lunch occasionally. That kind of investment does a lot to foster a sense of community and the networking options is a large draw for many of our clients.
In addition to leasing office space, we also provide virtual office operations. There is a large market for companies that don’t actually need office space, by do need a business mailing address and would like to have some sort of reception service. Many of these clients will then occasionally rent day offices, conference rooms or event space. In addition to catering to their specific virtual office needs, this allows us to build a community of short-term rental clients.
Insightive.tv: Why do you think the flexible workspace market is expanding?
Patrick: I think the flexible workspace market is expanding for a lot of reason. It provides an air of professionalism that is easily accessible for startups and small businesses. It allows larger companies to flexibly manage a diversifying workforce in changing markets. On top of all that, organisations like ours offer tenants the ability to essentially outsource all of their real estate issues. They come in, see a space they like, and we can have that set up for them to have meetings that afternoon. We allow companies to focus on their core competencies and not waste time shopping for office space or figuring out how to wire phones and establish an internet connection. This helps them scale their business — spending more time focusing on what they do, not where they are going to put their next employee.
Our meticulousness in this regard means we manage all our or workspaces in-house. We monitor tenants to identify trends and stay on top of what our tenants need. We use traditional surveys, and technology like Quickbooks and Excel, along with different web applications such as Mailchimp, Surveymonkey and others, to communicate with our clients as efficiently and effectively as possible and keep our finger on the pulse of their needs.
We are looking for a great year in 2017 and we are excited to hit the ground running in our locations that are under construction and push into new markets where opportunities arise.
Patrick Ryan is Chief Sales Officer at Real Office Centers. He joined the company in 2012 as Business Development Manager and has headed their sales department since 2014. Having begun his career in the technology sector, Patrick’s was able to put his development and sales expertise to use building ROC from the ground-up. We spoke with Patrick to get his insight on the burgeoning cowork sector and gain his perspective on the future of real estate.
Real Office Centers is a Commercial Real Estate firm founded in 2011 that provides serviced offices in coworking and private office configurations, along with virtual office services and event planning. They provide a flexible, friendly and collaborative operation with a range of contract periods and services that allow tenants to focus on what they do best — growing their business.
Part of THE FUTURE OF COMMERCIAL PROPERTY series
Trends, Challenges, and Opportunities An Inside View