In a sea of hungry young tech start-ups scrambling to solve real estate’s biggest problems faster and more efficiently than anyone else, Essensys is a veritable stalwart. Conceived in 2006 and launched in 2010, the business – which makes software for flexible office providers to manage their properties – has a longevity and a history that many real estate tech firms are unable to boast. Now the only listed UK proptech company with ambitious plans for global expansion, the business is riding the flex uptake wave – albeit after a tough couple of years as the global workforce navigated Covid-19.
In its latest trading update released in August, Essensys confirmed it is gearing up to press the button on US, European and Asian growth with renewed vigour as larger flex operators resume their expansion plans and traditional real estate operators make “positive steps” to move further into flex. With a client list including Industrious in New York, BioCity Science Park in Glasgow and Brain Embassy offices across Europe, Essensys already has a strong foothold in locations across the world. This not only provides a firm base for the growth of the business but a platform for the collection of intelligence and data that many would consider gold dust: return-to-office patterns in real time.
From humble beginnings as an idea pitched in the basement of a Soho karaoke bar with just £7,000 of capital to a global tech player, one of the greatest nods to Essensys’ success is the team now charged with spearheading its next phase of growth.
Chief executive and founder Mark Furness was joined by two key hires this year. James Lowery, former head of British Land’s flexible office operation Storey, took up the role of UK and Europe chief executive in February, and chief people officer Kally Kang-Kersey joined from US tech giant Zebra Technologies in the same month.
Here, Essensys’ freshly expanded top team reveals everything from how the business came to be to how the future of office take-up is shaping up and whether it is the tenants leading the landlords or vice versa when it comes to who is ultimately behind the future of work playbook.
A lucky break
When Furness formulated the idea for Essensys, real estate was not the sector he had in mind. Nor was any other sector for that matter. “Back then, the whole world was switching on to subscription-based services,” he says. “Through things like Spotify and movie subscriptions, I saw how you could get fabulous economies at scale with a great delivery and distribution model. The idea you could automate anything and make it self-service or subscription to solve a lot of problems in a specific industry was the vision, but I hadn’t landed on the industry I could help.”
Then came a serendipitous meeting with the then owners of Centrepoint “over a few beers” at the Lucky Voice karaoke bar 15 years ago, when they happened to be looking to launch flexible office space within their portfolio.
“Their main concern was how they were going to manage and deliver the technology,” says Furness, who wasted no time in jumping at the opportunity to pitch his idea. “We started to chat about my vision for a tech set-up that could easily be applied to flex space where there would be no techies needed, you could simply manage and control all of the IT and tech through a single piece of software. They said, “We’re your first customer” and they gave us a space in Centrepoint where we worked for four years to build the product.”
The first iteration of Essensys came to market in 2010. And the timing was right, says Furness. His prediction about the growth of the subscription model had come to be and the business started to roll out just as it picked up pace. Now, more than a decade down the line and post-Covid, the world of work has changed forever and flex looks set to be more central to the way we work than ever before.
“Flexibility used to be seen as a pretty grubby part of the industry,” says Furness. “It was dismissed by many people in real estate for a long time. But things have changed so much over the past 15 years. Now there is no chance of selling me a big empty box on a long-term lease full of other big empty boxes,” he says.
“We will see a shift now whereby real estate moves away from long-term contracts and customers. Our clients are much more focused on customer experience. They are ambitious when it comes to digital and flex,” he adds. “And the big real estate organisations are moving towards that future with much more certainty and confidence now.”
From strength to strength
It’s a certainty and confidence reflected in Essensys’ financial performance. Pandemic pressures aside, in August last year the business announced the number of sites it serves had grown by 13% and that recurring revenue now accounts for 87% of income, or £19.8m of £22.9m. It added that heavy investment in the US had seen recurring revenue in the region grow by 20% to $12.5m (£10.9m). The company posted a full-year loss of £2.9m, which it said was “a result of the investment in the group to deliver the growth plans”.
It was growth in the tech side of the flex office market that attracted British Land’s Lowery to the business. After six years looking at the sector through the eyes of a landlord, he was keen to get a fresh perspective.
“British Land’s flex offer scaled from zero to about 5% of its portfolio by the time I left,” he says. “And if I think about it then, Storey was a really independent part of the business when I started but was a lot more integrated by the end. The biggest pain point when I was there was getting flex workspace more established within the real estate sector. To a degree that has happened now. The next biggest pain point is getting the technology right, and that’s what attracted me to Essensys.”
While the business is gearing up for major expansion into the US and Asia, Europe remains a core market.
“The main focus is on France, Germany, the Netherlands and Sweden as the gateway to the Nordics,” he says. “The pandemic has slowed things down a bit but we will see a lot of activity over the next six months. Amsterdam and Sweden are very forward-thinking when it comes to flex spaces, so there are perfect fits for us in these regions. But in, say, France the market is a bit behind in the world of flex. It’s more conservative and the landlords are moving more slowly.”
He adds: “What is interesting there, though, is that some of the French companies are taking a view which is ‘we don’t really do flex but that doesn’t matter. We know it’s important to have a digital backbone across our portfolio’. That means they are putting the tech foundations for flexibility in anyway. So it’s slower but it is happening.”
Flex forward
While some regions might be taking a little longer to get there, flexibility will be a key part of the return to offices around the world. The reference to offices here is an important clarification, says chief people officer Kang-Kersey. “There is a sensitivity if return to the office is referred to as a return to work,” she says. “The latter suggests that people weren’t working while we were all at home, and I think most people would say they worked hard, if not harder in a home environment.”
She adds that the pandemic proved that flexibility and hybrid “is here to stay” and the key for companies looking to navigate their way into the future world of work successfully will be to work out what their business stands for and how they want to be seen as an employer. This, she says, will be the trick to attracting and retaining talent. “What is your company about? What are your values and culture? Those are all conversations businesses need to have because the reason people travel to the office now are different from before. Workplaces need to be more tailored to the individual. You have to think of different, fresh reasons to bring people together. What is happening right now is that people are trying to work out what their relationship with commercial buildings actually is. Are they places for collaboration? For shadowing and learning from others?”
Kang-Kersey adds: “A lot of organisations are saying people won’t come back to the office but the reality is different. A few people want to remain working from home but most want a blend. We are social animals. But what businesses need to be able to give these days is more guidance on why people should come to an office and what they will get out of it. We need to be more prescriptive about why we want people to come together and why businesses need that. There are enough proof points to say that some of the best solutions come from all being in a room together discussing, or even arguing. That’s all good fun and very cohesive.”
A blended future which sees people spend less time in the office than they did before but inspired to join forces to collaborate when they do come together is reflected in Essensys’ occupancy figures.
Furness says: “For the first few months after lockdown, occupancy was near zero across the board in every global market. Now occupancy is concentrated on Tuesdays, Wednesdays and Thursdays in the UK, Europe and North America. What is surprising is that, as an average, we are still less than 50% of pre-pandemic figures. Pre-Covid occupancy figures were 60-70% and that’s down to 35% now – 40% on a good day. There is a slight difference in APAC, where the return to the office in the Asian markets like Hong Kong and Singapore is much higher as there is a societal problem around working from home. Multi-generational families all in small spaces [have been a] social driver for people being in the office and occupancy levels returned to pre‑pandemic levels pretty quickly here.”
APAC aside, Furness says the new normal is “undoubtedly less time in the office”, which means the value of tech to track and manage quieter periods will increase. Whether that is tech that automates the network so it isn’t switched on or fully powered all of the time, he says the reality is that most people are still not coming into offices on Mondays and Fridays across swathes of the world. And that is something that needs careful consideration from a sustainability and cost perspective, particularly as the crisis around energy prices continues to spiral.
Landlord vs tenant
As landlords look to manage their portfolios as efficiently as possible against the backdrop of a new approach to work and life, the big question is whether they are now entirely in the hands of their tenants. As working patterns and trends are seemingly being driven by employees and talent, how much control do the occupiers actually have? The answer, says Kang-Kersey, is more than people might assume.
“Employees have pivoted the change. They are the ones who have said ‘it can work this way’,” she says. “Ultimately though, they are looking for solutions from us as an industry. It is a shared responsibility. The conversations we are having with people tend to see them asking us questions like ‘what are you doing in your hybrid spaces? In what environments are you seeing the best work being done?’ They know what they want to a degree, and they are braver now than they were when it comes to asking for it. But they need the industry to create those spaces and to work with them.”
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