Giant Commercial-Property Firm Goes All In on Co-Working With New Deal

January 14, 2025
Real estate-services firm CBRE Group is taking control of the co-working firm Industrious, a sign of the property market’s renewed interest in shared workspace as more employees return to the office. 

CBRE announced Tuesday that it has agreed to purchase the 60% stake that it didn’t already own in Industrious, a deal that values the co-working company at about $800 million. Industrious has more than 200 locations in over 65 cities globally that make office space available to businesses on flexible terms. 

CBRE said that Industrious Chief Executive and co-founder Jamie Hodari will move beyond Industrious to join CBRE’s senior team as part of a broad reorganization. He will oversee management of more than 7 billion square feet of commercial space and a business with about 95,000 workers, CBRE’s largest unit. 

CBRE is taking over Industrious just as more companies are ordering workers back to the office for longer periods. Office leasing is picking up in places such as New York City, especially in premium office towers. 
Founded in 2012, Industrious grew in the shadow of WeWork, the dominant player when co-working expanded rapidly before the pandemic. WeWork grew too quickly, failed at an initial public offering in 2019 and sought bankruptcy protection in 2023. The company emerged from bankruptcy last year. 

Industrious avoided WeWork’s missteps partly by adopting a much less risky approach to the shared-office-space business. 

Where WeWork leased big blocks of office space in hundreds of buildings, carving it up and renting out to individuals and businesses on a short-term basis, Industrious never took on leasing risk. Instead, it operates co-working space and shares the profits with building owners. 

Such deals didn’t expose Industrious to the long-term lease obligations that tripped up WeWork when the market slowed. The profit-sharing model has become more of an industry standard and even WeWork is now using it for part of its business. 

CBRE CEO Robert Sulentic got to know Hodari in 2020 when the company made its first investment in Industrious. Since then, Industrious has doubled its number of locations and tripled its revenue. 

Hodari, who now oversees about 650 people at Industrious, says his firm approaches the office-space business as a service business, like a hotel, that goes beyond simply providing physical space. 

Industrious spruces up its offices with natural lighting, greenery and a variety of work settings. It even varies the type of music played in common areas at different times of the day. 

“When companies provide exciting experiences, they get their people back in the office,” Sulentic said.

Industrious was well-positioned to expand during the early years of the pandemic when the outlook was murky over whether workers would return to offices in force. Businesses wanted short-term, flexible options in numerous markets while they sorted out the future of office space.

By late 2020, CBRE noticed the rise in the number of businesses embracing more flexible approaches to office space. That prompted Sulentic to reach out to Hodari for the meeting that led to CBRE’s first investment in Industrious, paying about $200 million for a 35% stake.

“We came to the conclusion that flexible space was going to be an enduring part of the office-building landscape,” Sulentic said.

Today, shared work facilities continue to play an important role as workspaces evolve. Many companies have crafted strategies that allow employees to work remotely some days, and most businesses recognize the benefit of flexibility.

“People really had to come to terms with the fact you can’t predict head count 10 years in advance,” Hodari said. 

Industrious will remain a separate business unit. But now that CBRE owns all of it, the parent company will include the Industrious co-working services among the options it offers to landlord and tenant clients. 

For example, CBRE might advise a tenant looking for new offices to sign a traditional 10-year lease for its headquarters and three or four Industrious deals for locations in different regions.

This flexibility will help businesses attract workers back to offices, Sulentic said. A number of prominent companies have fallen short of their goals to return workers to offices at a faster pace, he noted. 

CBRE used to be known primarily as a commercial-property brokerage. But over the past two decades it has been expanding into a variety of new businesses including real-estate investments, development and managing space for corporations. 

Under the reorganization, the company will be divided into four units. Hodari will run the building operations and experience division. The other three will be property investments, project management and advisory services.

Industrious has been adding about 30 to 50 new locations a year. The expansion rate “is going to be significantly higher than that” now that Industrious is a part of CBRE, Hodari said.

By Peter Grant (WSJ)


      

Topics

Archives