LEO’s premium serviced office business, which includes 38 flexible workspace locations and 260 team members, is now under new ownership. Announcing the transaction last month, CEO Jason Leek described it as “the beginning of a new and extremely exciting era for LEO and its clients”.
In a practical sense, how will this change of ownership strengthen LEO’s future?
“Having been in the sale process for a while, we’ve established a new ownership strategy with a type of investor who has a long-term view with ambitious plans, and is keen to grow the business over time,” Leek explained.
Leek describes the company’s new owner as a “private family style investor” who is intent on building on LEO’s foundations to continue creating a sustainable business for the future.
As for those “ambitious plans”, the new leadership team intend to capitalise on the flexible workspace industry’s impressive growth, which means LEO has a busy schedule lined up for 2019.
“We’re still in the early stages, but there are significant opportunities for us to increase our portfolio and continue evolving our product, to ensure we remain at the forefront of what our clients want. That’s our big focus.
“The industry is at an interesting point as it continues to mature. It’s clear to us that the next 5 years will see significant growth in the flexible space sector, and we intend to make sure we have the product and environment that our clients want.”
Park House is almost fully let after being open for less than one month.
That journey will include greater investment and refurbishment in their existing portfolio in order to deliver on their clients’ requirements, and this singular focus on the client experience is something that comes naturally to Leek. Prior to joining LEO in June 2017, he was responsible for a number of premium hospitality and service businesses at Compass Group and it is evident that he is now weaving hospitality-standard service into the LEO experience.
And it’s working.
“The properties we’ve brought on in the last 18 months have been our most successful to date,” noted Leek. “Park House has been open for less than a month and it’s almost fully let. Occupancy is also very strong at Nova North and we’ve just taken on two more floors at 1 King William Street due to our success at that location.”
As the industry grows, more flexible workspaces are recognising the importance of differentiating their brands through service, environment, and experience - and Leek expects this trend to continue.
“I’m very bullish about the sector. More people are becoming aware of its benefits, both small and large companies, and it is becoming more corporate too - they need to use flexible space to manage their cost base. For us, it’s very positive as we’re operating in a premium market for serious businesses who want an exceptional office environment.”
LEO has taken on two more floors at 1 King William Street due to high occupancy.
As for the future of flexible workspace, Leek refers to three major trends that have occurred over the past 18 months that indicate continued growth of the industry.
“First, we’ve seen serious investors showing an interest in the industry with different types of business models, from freehold-owned assets to asset-light models. The acquisition of The Office Group, bids for IWG, and now LEO, show continued appetite for the next phase of the sector.
“Second, there has been significant environment and sector growth overall. We know that this industry thrives on uncertainty and the current economic and political environment - including Brexit - is helpful to us.
“The greater the uncertainty, the greater the desire for clients to maintain flexibility. In fact we’ve seen more than 40% growth in leads year on year.
“Third, we are seeing the emergence of multiple players. Traditional property owners and landlords are working out how to take advantage of flexible space, which is as much of an opportunity to us as a risk. I believe it represents many great opportunities to work together as we have complementary skill sets.
"We’re in the hospitality business, and we just happen to be in real estate.”
Taking this further, Leek commented that flexible workspace is “a customer centred hospitality business”, which is inherently different from the focus of commercial property landlords.
“They are buyers, developers and sellers of real estate but they are not primarily a people-driven hospitality business. This can lead to mutually beneficial opportunities.“Ultimately, there is a structural change in the way people work and the way they want to inhabit office space. That is only positive for our industry, and I believe there are many opportunities ahead.”