Spaces CEO Martijn Roordink On How The Dutch Coworking Company Will Double Its U.S. Footprint Next Year
Between WeWork becoming the largest private office tenant in Manhattan, D.C. and London, Knotel’s leasing binge this year and Convene’s foray into designing and building flexible workspaces for landlords, you would be forgiven for thinking the coworking landscape is close to capacity.
Not so, says Spaces co-founder and CEO Martijn Roordink. He founded his flexible workspace company in Amsterdam in 2008 and sold it to Dutch giant Regus — which has since changed its name to IWG — in 2014. In recent weeks, it has announced a slew of new leases in New York City, and it is readying a major expansion in 2019.
Last month, Spaces inked a deal for 110K SF at the Chrysler Building, the company’s biggest location in the city. It is also taking nearly 100K SF at 787 11th Ave. and 62K SF at 175 Pearl St. in Dumbo. As of this week, it will begin opening up the 11th, 12th and penthouse levels at the 110K SF location at Brookfield’s the Lofts building in the Manhattan West megaproject.
The firm already has locations at the Helmsley Building at 230 Park Ave. and at the Falchi Building in Long Island City. At the beginning of the year, Spaces announced it was expanding to Staten Island.
“The single tenant doesn't exist anymore. The long-term contract doesn’t exist anymore,” Roordink told Bisnow in an interview discussing how the United States fits into the company's global expansion plan. “If you look at Manhattan, compared to WeWork we are still very, very small. But we believe, as a global company, that we have to act local. So the structural level, within New York, for example, is that we want to have, within every neighborhood, one Spaces.”
This interview has been edited for length and clarity.
Bisnow: How many [Spaces locations] have you got in the country right now, and how many are you hoping to open?
Roordink: Currently we have 45 in the U.S. And by the end of this year, there will be between 60 and 70. It depends on construction work. We will about double next year, all over the U.S. So next year we will be about 120.
Bisnow: Why now? Why this aggressive expansion in America? And why are you going after New York?
Roordink: The companies we have as customers want us to be here. Simple. So we team up with customers.
We see and forecast. For example, Manhattan has about 450M SF of office space. It's huge. And we just announced that we have 150K SF. So we are small. But we are growing aggressively.
We are a European company. We are quite conservative. We believe that every one of our locations must make money. And landlords are coming to us, they say, 'We like your style, we like your philosophy. We like that you are global.' So on the footprint level, it is more about the distribution when we specifically focus on one city.
For me specifically, New York was the example of starting Spaces, because of [its] energy and the dynamics and the entrepreneurial level of how people want to work.
Bisnow: Why is now the time for the American expansion?
Roordink: It's not American. It's global. We are opening next week in Chile, we have Rio de Janeiro, São Paulo, [Brazil,] Lima, [Peru,] Panama, Mexico, Cape Town, [South Africa]. We are now in 115 cities.
Bisnow: But the pace is moving at the same pace it’s always been moving? It's just that it seems like there's a lot happening in the New York area?
Roordink: Yes. And that's of course because we are all looking at WeWork. And we will say, 'Hey Spaces, why now?’ If you look at, for example, our clientele in Europe. Almost 50% of our customers are U.S. companies coming to Europe. And the same goes for European companies coming to the U.S. It is a switch that works really well. Being present in all the global cities makes you very attractive for the Facebooks and the Twitters ... Then they can create their own network.
Bisnow: So, you formally launched in 2008, and then you were bought by IWG or Regus as it was previously known, in 2014, so you basically went from a startup to being owned by a multinational company — what kind of adjustment did you have to make?
Roordink: Huge. It's huge.
Bisnow: On a personal level or on a company level?
Roordink: On a cultural level. We said, 'No, you have to separate Spaces from Regus.' Because we are something completely different. We have another audience. We cater [to] a new need. And we have to differentiate.
Regus became IWG because of Spaces, because [Regus founder] Mark Dixon also was convinced that multi-branding like hotels is very important to make a differentiation in price point, location point, audience point. And that is what we see now. We have No18, Signature, Spaces and Regus.
Bisnow: What do you make of WeWork's $20B valuation?
Roordink: We are valued at $3B. [That is] 25 times our profits. WeWork is $20B valued from private equity. It's another ballgame.
And that's just what money says. It doesn't say anything about the company. It's says about what money thinks the value of the company is.
Bisnow: So it's not talking about actual cash or actual dollars?
Roordink: It isn't. It's theoretical. We are listed. So we are practically worth X because people are buying our shares. WeWork's valuation level what money thinks it’s worth from a growth perspective, from a future — maybe — business model perspective. But in the end, you never know if they will make it.
Bisnow: So, do you think it's worth that much?
Roordink: If the money says, yes. Personally, I really don't know.
Bisnow: Because some people have scoffed at that valuation.
Roordink: I agree.
Bisnow: So you don't think it's worth that?
Roordink: We are not a tech company. We are not.
WeWork is exactly the same as Spaces is, only theirs is a different brand. Simple. They have members, they have offices, they have buildings, they have services. And they have another target audience than we have.
Bisnow: So, talking about WeWork and all these other companies. What is it that you offer, that these companies do not already have for us in New York or in America?
Roordink: It's a look and feel. If you go to Hudson Yards, you'll feel something completely different. It's more European, it's more sophisticated. We have a large business club. But in the end, we are exactly the same in delivering an office. It's just an office.
But the flexibility is there, I think the tone of voice will differentiate us, the partnering and events differentiate us. But in the end, we deliver a solution, a product [just] like every hotel.
Bisnow: Yeah, I guess when you think about it, a hotel is just a bed in a room.
Roordink: Like everywhere else, and office is the same. The only part is we believe that we differentiate in our audience group.
Bisnow: What is different? Nicer places? Different design?
Roordink: Design. It's the art. It's the people. And it's a kind of energy you feel. If you go to a WeWork, you know exactly what the look and feel will be with the glass and black frames and the wooden floors. We are very much more European, Nordic European, with the toning and the coloring scheme. And the lighting scheme, it's completely different.
Bisnow: So who do you have in the United States as customers now?
Roordink: We have, worldwide, Spotify, Facebook, Twitter, Ernst & Young. I have just signed up a deal that [starting Nov. 1] we are placing a Spaces within a Microsoft headquarters.
Roordink: Schiphol in Amsterdam. And this is also where the large corporates, they have to refresh their culture. You have to be attractive to talent.
Typically corporates ... they are very into security, very into privacy, and in a way exclude their own network from who they are.
Microsoft, for example, has 600,000 resellers worldwide. So there are 600,000 companies making money out of Microsoft. So Microsoft has the idea, ‘We have to open up, and become a kind of clubhouse for our resellers. We can't do it ourselves. So we teamed up with Spaces.’
Bisnow: So you are going to their headquarters, and creating a Spaces within their headquarters?
Bisnow: Has that ever happened before?
Roordink: No. And that is the differentiation. It is an office, but it's all about rethinking how to, in a way, communicate with the customer base.
Bisnow: Do you think more corporations or big, big companies like Microsoft will start doing this, start coming to people like you and WeWork and Knotel and say: ‘Come to us, help us make this cooler?’
Roordink: Definitely. Yes. Make us attractive again for the new generation.
Bisnow: So, going back to that issue of competition. We just saw, this week, Tishman Speyer — a huge office landlord — they've said, hang on a second, why don't just do this?
Is that going to be a problem for companies like you? Like WeWork, like Knotel. When landlords are like, hang on a second, I can just do this myself?
Roordink: The question there is, is it in their cultural competence level of going into hospitality operations? Instead of being building owners and developers?
Bisnow: Can they do it?
Roordink: I don't know. Then you have to reinvent yourself and you have to create a company within your company that can drive it, not as a construction and development, because the moment you are going to communicate like that to your customers, it's not going to work.
Bisnow: It's not rocket science though, is it?
Roordink: It isn't, but a hotel is also not rocket science. One is better than another one. So it's brands, culture and communication and driving the customer needs. It's quite a profession. It is. So we can't underestimate what we do. But it's not rocket science. It isn't.
Bisnow: You just opened in the Chrysler Building, you are at 787 11th Ave., you are in Brooklyn, you've got a spot on Staten Island, your first location was in Long Island City. So where is next? Where is the next location in the city?
Roordink: Within Penn Station area. And if you look to now the full portfolio level in Manhattan, [within 12 months we will have] about 15 locations.
Bisnow: Where you do look at and say, 'Hey, that's where we need to be.'
Roordink: Anywhere where we believe there's the right location connected to a subway, connected to the right building, where we can have ground-floor presence, because that is very important for us.
Also at the Chrysler Building, we have ground-floor presence with a private elevator going up to the seventh, eighth and ninth floor, which is quite unique. And there we showcase what we are and what we do. The same comes with Hudson Yards, ground-floor presence going up to the full penthouse, with business club.
Bisnow: Where else are you in the United States?
Roordink: LA, San Francisco, San Jose, Palo Alto, Denver, Chicago, Miami, Washington and New York.
Bisnow: Where do you want to be that you are not already?
Roordink: In the end what we believe in is national networks. We believe that also next to the first-tier city, second- and third-tier cities [are] becoming more and more important for people, because they are also the energizer around the environment. So we are now opening also in second-tier cities.
Bisnow: Like, which ones?
Roordink: We just opened four or five in what I would call, when I was like, as a Dutch guy, 'Never heard of that one.' But if you then go into the demographics and geographics, because it's all a demographic and geographic game.
You dive into an area and you say, OK, how do people act, how do they work, what do we believe in the full environment. How attractive is this for people to got to certain places and then, of course, within the third-tier cities, the location there, is super important.
But also we believe that we will grow into the larger malls.
Bisnow: Malls that have been left vacant?
Roordink: Malls need to reinvent themselves to become attractive to the user group.
Bisnow: What is it that you see as the next thing for coworking generally. Is it retail? Is it housing like what we've seen with WeLive? Because you have to keep evolving, surely.
Roordink: Definitely. But if I go into live I always say, people don't want to work there where they live. They don't and working from home sounds great, but in the end you are lonely.
Bisnow: So what is your next thing? Retail?
Roordink: Yes. Retail. Airports, train stations. So anywhere where the hub becomes important for traffic. Or to make people [commute less]. That's where we are.
Bisnow: In the next five years, what do you think is going to change the most in the way that we work, generally. And, what do you think is not going to change?
Roordink: We are, as people, we are quite still traditional. We like to [work] 8 a.m. to 6 p.m. But for example, we as Dutch, we are in the top five most productive countries in the world. And we have an average working week of 32 hours.
So, definitely work-life balance will change. Everybody's working, everybody is also thinking about the next generation. Are we doing well for the earth, yes or no? But productivity becomes then a key level of work. So yes, many of the new generation will work two days next to where they live because then they are connected with their neighborhood and their kids.
Second one is that, I don't know what artificial intelligence will bring, but within five years definitely the algorithms will change administration, accounting.
Bisnow: You are a European company. You are in the work world of America. What kind of difference do you see, in terms of what you are setting up? Are there cultural differences that you need to be aware of?
Roordink: One is that, culturally, is the sense of, here in America, your labor relation can end in one day. In Europe it isn't. So people are very aware of what they have to deliver. And that also means that there is no choice.
In Europe, or more or less the Nordics of Europe, they have more of the free thought about, but 'I want to work here. And if I don't like it anymore, I will go to another [job].' So they have a more open-minded level of being productive and wanting to deliver.