Fifth Wall Invests In Industrious to Bring Best in Class Workplace-as-a-Service Platform to Strategic Landlords
The Largest Commercial Real Estate Landlords are Partnering with Industrious to Meet Current and Future Needs of Their Fortune 500 Tenants
Large corporation’s desire for increased flexibility in their real estate portfolios and the intense talent war they are waged in are leading to a massive sea change in the commercial real estate landscape. In a CBRE survey of senior corporate real estate executives, 51% of respondents hoped to implement a shared-workplace model substantially or moderately across their portfolio by 2020.¹ A boon for coworking providers, this shift represents both a threat and an opportunity for commercial landlords. Total office rents in the U.S. represent $600 billion annually. While coworking accounts for only 1% of rents currently, that figure is expected to climb to 15–20% by 2025 (representing a $80-$120 billion addressable market).²
Most coworking providers are focused on startups and freelancers, and unable to meet the unique workplace needs of corporate clients. Even the most sizable providers purporting to serve enterprise tenants come up short. Their focus on quantity of locations over quality has led to poor customer experiences and a subpar workplace product. Moreover, coworking providers approach to landlords has been one of animosity, treating property owners as merely a provider of physical space and tenants as wholly theirs.
That presents an untapped opportunity for a premium coworking provider to meet and exceed the needs of Fortune 500 tenants while acting as a great partner for landlords. That company is Industrious, a provider truly redefining coworking into a workplace-as-a-service (“WaaS”) platform taking a partnership approach with landlords. The company focuses on outfitting Class A buildings with both stunning offices and inviting hospitality geared towards large corporate tenants’ demanding standards. With a belief that optimal tenant experience is only achieved working with the property owner, the results speak for themselves: a Net Promoter Score (NPS) score in the 70s (major competitors’ NPS is in the low 30s) and a Fortune 500 customer list including GM, Freddie Mac, and Pfizer. Survey every major Class A landlord their top choice of workplace partner and the answer is unanimously Industrious (Fifth Wall knows because we did exactly that).
Fifth Wall believes WaaS platforms will be an integral part of every commercial building in the future while simultaneously acting as the ultimate amenity for its tenants. Fifth Wall’s strategic real estate LPs and partners include the largest commercial landlords in the country, and we are thrilled to announce our investment in Industrious. Not only will our landlords help Industrious grow supply, but Industrious will help them retain and attract large corporate tenants by meeting their evolving workplace needs.
Industrious’ Workplace-as-a-Service Platform
Quality is a cornerstone of every Industrious workspace. Elegant design, high-end furnishings, and attention to detail sets Industrious spaces apart from the competition while giving tenants an advantage in recruiting and retaining top human capital. Industrious has succeeded in creating workspaces where established professionals are as comfortable as Millennials. Members at most coworking providers are embarrassed to host meetings with clients and partners, while Industrious members are ecstatic to show off their workplace.
Engineered to operate less like office spaces and more in line with world class hotels, Industrious’ quality standards extend beyond space to hospitality and service. Every space includes community managers who prioritize best in class hospitality. Providing members peace of mind to focus on work instead of office logistics by stocking snacks, setting up new workspaces, and going above-and-beyond the call of duty to take care of the tenants’ workforce. Stories of community managers helping customers with citizenship tests and picking up craft beers for an executive whose colleague quit are common occurrences. Industrious understands creating workspaces where talented people love working is as much about making people feel welcome, cared for, and looked after as it is about serving local artisan coffee (though Industrious spaces do that as well).
A key differentiator for Industrious is its relentless focus on enterprise tenants with demanding and far-reaching workplace needs. Enterprises, particularly the Fortune 500, require flexibility a real estate portfolio made up solely of long term leases cannot provide; short term leases are a huge benefit for tenants. Designing and deploying custom suites, such as McKinsey & Company’s deployment in New York City, is one example of going the extra mile to exceed enterprise requirements. Corporates increasingly demand a national platform to satisfy their growing need for satellite offices, which few WaaS providers can offer. It’s clear the enterprise trusts Industrious already: McKinsey & Company, Hyatt, and Chipotle, as well as tech titans Pandora, Instacard, and Lyft, call Industrious home.
Founded in 2013, the team is led by co-founders, Jamie Hodari (CEO) and Justin Stewart (President). The executive team has decades of experience at top hospitality brands including The Ritz Carlton, Waldorf-Astoria, Nordstrom, Intercontinental Hotels & Resorts, and Starwood. The result of the customer experience being shaped by a team with broad and deep experience in hospitality is the highest customer satisfaction in the industry.
The Fortune 500 and Commercial Real Estate Landlords
With a strategic network of the nation’s largest landlords including Hines and CBRE as LPs, Fifth Wall constantly seeks partner solutions to increase property owners ability to serve tenants. While it is clear Industrious’ WaaS platform is a win for Fortune 500 tenants, it also benefits commercial landlords in numerous ways. First, Industrious is the ultimate amenity, allowing tenants to scale their real estate needs up or down on demand. Gone are the days of an important customer leaving your building due to a lack of short term real estate expansion capability. Second, WaaS space is the best place to test any new technology, amenities, or furnishings, prior to a building wide deployment. Third, with the significant short term rates spread, Industrious’ unique experience in and use of management agreements allow landlords to share in the upside of the business. Fourth, white label options provide landlords the opportunity to come out of the shadows and custom build high end branded workspace deployments for enterprise customers. Fifth, Industrious’ enables landlords to tap a myriad of revenue opportunities through tenant services currently being lost to other parties.
WaaS will create and destroy more value in office real estate than any other phenomenon over the next decade. Large enterprises are embracing flexibility for real estate optionality and because of the realization workplaces are the ultimate tool to retain and attract talent. Industrious has emerged as the best in class WaaS solution and partnerships with our strategic landlords will increase Industrious’ supply while gaining national platform effects. As an investor, Fifth Wall is excited to help catapult Industrious to a position of category leader in one of the fastest growing sectors in built world tech today.
¹ CBRE Americas Occupier Survey Report 2017: https://www.cbre.com/research-and-reports/americas-occupier-survey-report-2017
² Growth rate from Small Business Labs Coworking Forecast: http://www.smallbizlabs.com/2016/08/coworking-forecast-44-million-members-in-2020.html