Office Space Advice
ABCN’s Cottle Discusses State of the Serviced Office Industry
Published December 23rd, 2009 by Jennifer LeClaire
When Frank Cottle speaks, the executive suites industry listens. And Cottle, founder, chairman and CEO of the Alliance Business Centers Network, a global executive suites network partnership that represents office space providers in 700 locations across 40 countries, has plenty to say about changes in the industry as 2009 comes to an end.
How has the serviced office industry changed over the past 30 years? What are the most effective business center ownership models? What does it take to acquire capital? And what’s holding the industry back from more explosive growth? aBetterOffice.com sat down with Cottle to get his take on these issues.
What do you see as key turning points for the industry over the past 30 years?
First, we’ve had the impact of technology on the industry, both positive and negative. Initially, it was negative in the sense of the loss of service revenue. Now, we’re using technology to gain service revenue. That’s one flip-flop cycle that’s been a 10-year process. We’re just now learning to regain and recapture the revenue we’ve lost as a result of the evolution of PCs, cell phones, etc.
What about the change in business center ownership models?
One- to three-center owners used to be very common. They started as small service businesses, typically a tenant within a larger building, and subdivided space. That’s the classic model. Today, two groups are growing the fastest in the industry.
The first is property companies themselves – building owners who are building business centers within their own properties through their own ownership operation, or partnering with business center operators in order to share with them the benefits of operation. They’re doing it to enhance the yield on their properties but also to service the full lifecycle of the customer more effectively. We’ve seen that as a major shift.
We’ve also seen the development of very, very powerful super-regional companies with 10 to 100 locations in a variety of marketplaces. They are faster to react and managed with more focus and aggression. Usually these are private companies or companies that have their sidecars connected to larger public companies but still run sort of more like a private company. They’re real quick to react on everything. They’re very, very competitive. They provide superior services in many cases. And most importantly, they have capital.
What is the situation with capital in the executive suites industry?
There is more capital available in this industry right now than ever before – even in this down cycle in the marketplace. You just have to have a business plan worthy of attracting it. And there’s a lot of money that has moved into the industry within the last 36 and 48 months. External investment is a new trend in the industry.
What do you see as the executive suites industry’s biggest challenges today?
Getting rid of the grey hair, and I’m serious about that.
There’s a legacy in our industry, in management, in theory, in operations, in equipment, in facilities. Some of your previous articles around offices of the future talk about the way things will be done. I say 99 percent those things are here now and people aren’t adapting them fast enough. So, when I say grey hair, I mean the legacy elements of the industry need to be shepherded forward a little faster.
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Elizabeth Sanchez December 29th, 2009 at 9:38 am
Frank is a mastermind. I love these Q&As with him. He always brings great perspective in the context of the overall serviced office industry. No one has talked about capital investments from outsiders much. I think that could be the catalyst for major growth in the executive suites industry as the economy recovers.
Bill Brookshire December 29th, 2009 at 3:18 pm
It’s interesting how technology was once a threat to the serviced office industry, and now executive suites operators are turning tech to their advantage. That’s a fabulous insight from Cottle. I also found it interesting that he thinks the industry needs some fresh blood. I would agree with that for just about any industry. The serviced office industry is no exception.
Daniel December 30th, 2009 at 9:49 pm
I agree about shedding the legacy part. I want to reclassify it as HybridOffices. it’s timely with the green movement and will be specific to our product. Part physical office, part virtual office, all business. Virtual office can be confused with the technology that enables us to work remotely. We can fill the void that is being left by starbucks as “third spaces”. The meeting point between the home office and the corporate office. A Hybrid.