CBRE Group Inc. is upping its game in the flexible office business.
The Dallas-based commercial property firm has acquired a 35% stake in Industrious, a New York-based coworking company with locations in Dallas and other major metro areas.
CBRE already had its own shared office platform called Hana, which opened its first location in Dallas in 2019.
Now the firm’s acquisition of part of Industrious gives CBRE a greater reach in the coworking industry.
“Our investment in Industrious is consistent with our view that flexible office space is playing an increasingly central role in companies’ occupancy strategies and aligns us with an exceptional operator and an outstanding leadership team that is executing a great strategy,” CBRE chief executive Bob Sulentic said in a prepared statement. “We have been building our Hana flex-space business expressly to meet the flex-space opportunity, and Industrious now enables us to capitalize on it at scale with a portfolio of well-situated units in key markets.
“Industrious is highly, highly regarded and it had the best client satisfaction scores in the industry,” Sulentic said Monday in an interview. “Our clients were very happy with us, but they weren’t quite as happy as the Industrious clients were with them — that’s important.”
CBRE said it plans to acquire more ownership of Industrious in the next few weeks and grow its stake to 40%.
The deal is being made with approximately $200 million in cash, and CBRE’s 10 Hana locations will be transferred to Industrious.
In making the purchase, CBRE cites recent studies that found 86% of its corporate clients plan to utilize flexible office environments and 82% say they will favor office buildings with a flexible space offering.
“With all that’s going on for the last year, for sure they want more flexibility,” Sulentic said. “They want to be able to get in-and-out space.
“They want to have the ability to have small pieces of space that are remote from headquarters. "
Sulentic said most office employers are still trying to figure out their post-pandemic real estate needs.
“They are very uncertain about their future,” he said. “Largely what they are telling us is they expect flexible space to be part of their portfolio going forward.
“And they said that when they go into multi-tenant buildings, they want to be in a multi-tenant building with a flexible space operator.”
Industrious has more than 100 locations in more than 50 U.S. markets. The shared office provider has locations in North Texas in downtown Dallas and Plano’s Legacy business park.
Industrious opened its first area location in downtown Dallas’ One Arts Plaza building on Flora Street in 2017. The company is opening a location this spring in the Farmers Market.
Jamie Hodari, co-founder and CEO of Industrious, said employers are making plans to return workers to the office.
“You can’t do that without some sort of flex space,” he said. “That’s is part of what is driving the uptick in anticipated and current demand.
“It’s almost a necessary component of the post-vaccine workplace strategies.”
Unlike some coworking companies, Industrious was never focused on large shared-office environments.
“We got lucky,” Hodari said. “A lot of coworking historically was just rent a desk in a big open floor plan space.
“Years ago, we made the decision that was not the product we wanted to be in,” he said. “We are only a private office product.”
That’s a plus in a pandemic world where workers are keeping their distance.
“It’s like going back 30 or 40 years, where everyone has their own private office,” he said. “It’s the big open floor plan offices where more is happening in terms of rejiggering the layout.”
As part of CBRE’s investment in the firm, both CEO Sulentic and global chief investment officer Emma Giamartino will join Industrious’ board of directors.
Hodari and Sulentic both expect the link up between the two firms to grow their businesses.
“It’s a tremendous moment for Industrious to get this vote of confidence, and we look forward to expanding what we can do for our customers while keeping the same commitment to the highest customer satisfaction in the industry,” Hodari said.
With the pandemic, 2020 was one of the worst years for U.S. office leasing in decades.
In Dallas-Fort Worth, net office leasing last year declined by more than 4 million square feet — the biggest drop in more than 30 years.
Leasing activity has slowly increased in recent months, but there are still questions about how quickly most companies will be back in the market for office space.
“We believe that most companies will come back to the office in a very significant way,” Sulentic said. “However, they won’t come back to the office all the way.
“Maybe the aggregate occupancy will be 80% or 85% of what it was before,” he said. “Then it will grow from there.”
Sulentic said the leasing will be concentrated in the best buildings with the best amenities.
“We are going to learn a lot more when we get to the other side of COVID,” he said. “I’m hoping that by the third quarter or so, we are mostly through COVID and everybody’s thinking about the future will begin to clarify.”
