CBRE Buys 35% Stake In Industrious For $200M
The biggest commercial real estate services firm in the world is pouring $200M into the fastest-growing coworking company in the U.S.
Commercial real estate giant CBRE has acquired a 35% interest in flexible office specialist Industrious for $200M in cash, with plans to take another 5% in the near future, the firms announced Monday. The deal will make CBRE Industrious' largest shareholder.
CBRE’s current flexible-space offering, Hana, will be merged into Industrious as part of the transaction. Industrious has more than 100 locations in more than 50 U.S. cities, while Hana has 10 locations in the U.S. and the UK.
"We would like to keep the Hana brand," Industrious CEO Jamie Hodari told Bisnow in an interview Monday. "It's obviously challenging for a growth business to run multiple brands, and we've done enough M&A in the past to know that. Still, I think we're going to give it a shot."
One of Industrious' distinctions in the coworking business is that the company signs management contracts to operate coworking spaces for landlords, rather than leasing the space itself. Under that structure, Industrious offers various open-plan suites, private offices and dedicated work desks.
Industrious, with its partnership-based model, is on a growth trajectory of its own that involves plans to take over dozens of coworking spaces abandoned recently by sublease-based operators such as WeWork. Brooklyn-born Industrious expects to take over 30 to 40 coworking spaces nationwide in the next 12 months, or an estimated 1M SF. It opened 1M SF of new space in 2020, Hodari said.
"A lot depends on the quality of existing spaces that are available," Hodari said. "Our strategy will be continued growth in our top 25 cities, and any cities that people move to that weren't historically work hubs, but might prove to be moving forward."
CBRE cites its own surveys that show that 86% of its occupier clients plan to use flexible office space as a reason for the investment in Industrious. CBRE also reports that 82% of its clients favor buildings that offer a flex-office component. A large stake in Industrious will help meet its clients' demand for flexible-office arrangements, CBRE CEO Bob Sulentic said in a 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," Sulentic said.
CBRE made a direct equity investment into Industrious, even though it recently formed a blank check company with the goal of acquiring a growing company in the real estate space. Under the agreement, two CBRE executives, Sulentic and Global Chief Investment Officer Emma Giamartino, will join Industrious’ board of directors.
The deal keeps Industrious privately owned, with previous investors like Brookfield Properties, CPPIB and Riverwood Capital. Last year, Bloomberg reported that Industrious was targeting an initial public offering in the spring or summer of 2021. Hodari said that is still a goal for the company in the not-too-distant future, though he didn't offer a specific timetable.
"We are still very much marching towards that," he said. "This doesn't change the timeline, but it certainly fortifies that trajectory. We'll be even more appealing as a business in the public markets, if and when the time is right."
UPDATE, FEB. 22 3:20 P.M. ET: This story has been updated to include comments from Hodari.