Convene Sets Sights On 500K SF London Portfolio By Bringing Hospitality To The Workplace
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It is safe to say that Convene’s expansion into London was not a knee-jerk reaction to the boom in the flexible workspace sector in the UK capital.
The New York-based company announced its first UK location earlier this month: It is taking 102K SF at AXA Investment Managers — Real Assets’ 1.4M SF 22 Bishopgate skyscraper in the City.
Talks between the two sides had been going on for almost two years about what kind of space Convene could provide and the best way to structure the deal.
The company has ambitions to build up a portfolio of at least 500K SF in London, its first market outside of the U.S., and in November hired Elliott Sparsis from Blackstone and James Frankis from Gensler to run the UK operation.
They told Bisnow the company is a hospitality business, not a coworking operator. They believe the hospitality angle is often overlooked in the UK, and Convene plans to leverage that to carve itself a unique niche in the London real estate market.
The deal with AXA at 22 Bishopsgate neatly sums up the Convene business model. Of the 102K SF it is taking, half will be meetings and events space spread across two floors. Tenants of the building or external companies can hire space for meetings and events for between 30 and 350 people, with built-in technology and service by dedicated production, IT and hospitality teams. That includes a full-service culinary team operating from an on-site commercial-grade kitchen facility.
The other half of the space, again spread across two floors, will provide 600 desks of flexible workspace for companies from 10 to 100 people, which again can be used by the building’s tenants or external companies.
With companies like WeWork and Knotel expanding at rapid rates, Convene is looking to find a different niche, which entails a focus on quality over quantity (though of course, half a million square feet would not be a small footprint).
“We are not just another coworking company,” said Sparsis, who is Convene's vice president of real estate for London. “While WeWork has shown that companies are comfortable buying large amounts of real estate off the shelf, we think of ourselves as a premium offer in the London market with a focus on attracting businesses that want a HQ environment.”
Convene was founded by Ryan Simonetti and Chris Kelly as a meeting and events business in New York, and only moved into the flexible workplace sector after several years. Its hybrid business model has drawn the attention of significant investors within real estate and beyond: Its backers include real estate firms like Brookfield, RXR and QuadReal Property, as well as venture capital firms like Revolution Growth.
A $152M Series D funding round in July last year valued the company at around $500M, according to Bloomberg.
Sparsis and Frankis said there is a chance to shake up the London market in both the events and meetings space and the flexible workplace sector. They said hotels that are the typical venue for large events are not doing a good job, and in the flexible office sector, the focus on hospitality is a big differentiator.
“Solving the hospitality problem for businesses and landlords is the difficult part. Once you’ve done that, everything else falls into place,” said Frankis, the director of workplace product. “Once you have the infrastructure to provide catering and hospitality for events and meetings, it makes sense to put a floor of workspace on top of that. That infrastructure is the platform for everything else.”
It is telling that, in the release announcing the deal at 22 Bishopsgate, AXA described the letting as providing amenity for its tenants: Whereas once companies might have had their own in-house kitchen for corporate entertaining, now the building does it for them. And rather than a developer or landlord doing it themselves, they have outsourced the function. This is space as a service in its purest form.
“It makes sense for tenants and landlords to outsource inefficient components like their auditoriums, kitchens and catering elements of a building,” Sparsis said. “We really work in partnership with landlords. We are willing to look at structured leases and revenue-sharing, and it is a way for landlords to create value for existing tenants, which helps the landlord derive value, too.”
The deal at 22 Bishopsgate is a flag in the ground for Convene in London, and while it would be happy to sign more 100K SF leases, the scale of buildings in London makes this unlikely. More typical will be leases of 40K to 60K SF.
“We’re looking at multiple sites, and can do smaller buildings here. It is more challenging in London to find big buildings that allow the economies of scale to create that amenity space,” Frankis said.
But that partnership element is key for the company.
“Everything has to be a partnership, and we are not just going to sign long leases for the sake of it to find space,” Sparsis added.
Another type of space it is looking to bring to the UK is its members club offering. In New York it runs Club 75 at RXR’s 75 Rockefeller Plaza. The space combines the social element of a members’ club like a top-end bar and restaurant with space where members can work.
“I think the club market is well understood over here, but it will become better understood the more offerings there are,” Frankis said. “And I think you have to drag the social and commercial elements together more. Work and social life are blurring more and more. Soho House [with its ban on laptops] is pushing against customer demand. We like to think of what we offer as a work club on steroids.”
As companies and their staff demand more flexibility in the way they work and better amenities where they work, the worlds of hospitality and offices are becoming ever more integrated. Convene is taking that to the maximum, and bringing it to London.