Convene CEO Ryan Simonetti On Pricing, Reopening And Redesign
“It’s been emotional,” Simonetti told Bisnow.
Without revenue coming in, the company made a swift decision to lay off and furlough more than 400 employees and cut costs. It also immediately worked to renegotiate its leases and applied for and received a loan from the Paycheck Protection Program. Simonetti said the company will gradually bring its staff back as it continues to reopen its spaces. He did not disclose how many will come back.
Simonetti would also not disclose how much money the company received from the PPP, saying only that he believes they were eligible for the max amount, which is $10M. A Convene spokeswoman later said, "Convene applied for the loan but at this time we cannot confirm what was approved."
It is unclear if Convene's major rival companies such as WeWork, Knotel and Industrious applied and received money from the PPP. Neither WeWork, Knotel nor Industrious replied to Bisnow requests for comment by press time.
“I think it’s easy to get deer in headlights and easy to pretend that this isn’t happening, [but] accepting the reality of the situation and being decisive and making tough decisions quickly is something that I’m proud of our team from top to bottom for doing," Simonetti said.
Founded in 2009, Convene branded itself as a hospitality company that services and manages a building partner's meeting, events and some office spaces. In 10 years, the private company had raised more than $260M from investors such as Blackrock, Brookfield Properties, ArrowMark Partners, RXR Realty and Elysium Management.
Now, three months after the coronavirus forced Convene to close its flex offices, and now that states have begun reopening, the workplace solutions provider said it is looking to revive its flex office, meetings and events business.
Simonetti and Convene Global Chief Operating and Chief People Officer Amy Pooser discussed with Bisnow on Wednesday the company's reopenings, what Convene flex offices will look like during the coronavirus, the future of coworking and how the company has been able to navigate through this crisis.
Prior to the coronavirus, Convene was on track to another profitable year, Simonetti said. The company had 10 coworking spots nationwide and an additional 22 locations where it manages or leases a building's meetings, events spaces and even cafés. When the coronavirus hit and after learning of a confirmed case in one of its New York coworking spaces, Convene closed all of its locations to slow the spread of the virus.
Simonetti said that since then Convene has overhauled its spaces and updated its operating standards to ensure employees’, members’ and guests’ health and well-being.
Following nationwide city reopening and health guidelines earlier this week, Convene is now reopening its locations. Earlier this week, the company opened its space at the Wells Fargo building at 333 South Grand Ave. in Los Angeles and at the CityView building at 30 South 17th St. in Philadelphia.
On June 22, Convene plans to reopen its three locations in Chicago and two in Washington, D.C. The following week, on June 29, the company will restart its operations in three locations in New York at 101 Greenwich St., 530 Fifth Ave. and One Liberty Plaza.
“This is really exciting for us and we look forward to welcoming our workplace customers back,” Simonetti said.
Convene said its meetings and events locations will reopen at a later date.
Simonetti said that in Los Angeles, he expects 30 of his clients to come back. The average Convene customer has 30 employees and signs up for at least an 18-month term.
"These are real offices for real companies. In the short term, demand has dipped but it'll be interesting to see in the second half of the year, once people get back into the office and tour space again, we're going to keep an eye on demand," Simonetti said.
"There hasn't been any pressure on pricing," he said. "Because of all the things that we've been doing, making our places as safe as possible, we've been able to maintain price integrity."
Simonetti said he expects 50% daily occupancy at the offices by the end of the year, with the exception of New York where he says 25% to 50% is the benchmark and target goal.
New-Look Coworking Offices
As part of its efforts to prevent the spread of the coronavirus, Convene said it is taking several precautions in its office space and has implemented new health measures.
"In addition to the core redesign for less density in our flex office spaces, we’ve also added temperature checks, daily screenings and active monitoring as part of our partnership with Eden Health," Pooser said.
The company has also offered its members a membership to Eden Health, a primary care startup.
Simonetti said aside from an increase in cleaning and disinfection of common areas and the de-densification of certain areas to prevent people from gathering, the company has invested heavily in improving air quality through MERV-13 and other air purification systems.
Food and beverage, which were usually provided as grab-and-go or buffet style, will now be chef-prepared, pre-boxed lunches with disposable cutlery, delivered to a client or meeting.
Lastly, Convene will require its customers to sign a new social contract as a way to increase communication and transparency with customers. Simonetti said it is for psychological safety.
"If someone is sick or exposed or been in contact [with someone with the coronavirus], there has to be an expectation that they [will] also as an individual do the right thing," Simonetti said.
The Coworking Industry
Short term, Simonetti said, the entire coworking industry has been impacted by the coronavirus. But the size of the impact varies by company, region and customer base.
"If you are company with a lot of smaller user demand, that is going to take some time to come back," Simonetti said. "But with that said, medium to long term, the cost and complexity to run and operate space has increased exponentially. Outsourcing is more relevant today than 90 days ago, and I think there's going to be a demand for highly flexible office solutions."
Anecdotally, there has been some evidence that backs Simonetti's claim on outsourcing. Colliers International CEO Jay Hennick told Bisnow last month that his firm is experiencing a surge of inquiries from companies looking to outsource their real estate operations. Some experts have posited that even with a strong trend in employees now wanting to work remotely from home at least once a week, office space will still be in hot demand.
But a study done by ReserachandMarkets said the increase in the number of people working from home or remotely due to the coronavirus lockdown limits the growth of the coworking market.
Since Convene mostly caters to small companies with an average size of 30 employees, Simonetti said he believes the company is now better positioned than some of its competitors. Still, in the short term, it is unclear how the market responds to coming back to the office.
"Long term I'm bullish," he said. "But I don't see any office space coming back to full utilization until 2021, when I think we have a lot more clarity and understanding of the virus and who is at risk and what age group and other stats."
While Convene's business and navigating through the coronavirus-catalyzed downturn has been challenging, Simonetti said he remains hopeful for the future.
“Our plan from the beginning is to survive and thrive," Simonetti said.
The company has survived so far through the different cost-cutting maneuvers, renegotiations and the PPP, he said. Now, after speaking with its lenders and investors, Simonetti wants to play some offense. He calls it "Convene 2.0 and the great accelerator."
"There were a lot of workplace trends that we didn't think were going to surface in 10, 15, 20 years," Simonetti said of remote work. "We have an opportunity to create the future of work."
Pooser said the company launched a new virtual meetings product and an enhanced hybrid meetings experience. The new virtual meetings platform will provide live, human support before, during and after a digital meeting or event.
In a way, the new offerings are a way to hedge what could be a lack of demand in office and meeting and event spaces at least in the short term.
"This is such a dynamic situation," he said. "Things are changing by the day, by the week, whatever plans we have today we'll continue to evolve."
Simonetti said Convene has an opportunity "to live up to the vision of creating a great day at work wherever that happens."
"The next 12 months will be tough, but I continue to be optimistic and confident," he said.