Rebuilding & Refining: Reflections and Predictions on the Future of Work

First, I wanted to wish Happy New Year to all of our clients, partners, industry friends, and our incredible Convene team members.  Thank you for your continued support, partnership, and for constantly pushing Convene to be 1% better each day.  Before I share my industry predictions for 2023, I wanted to take a moment to reflect on 2022 and some of the key themes we observed at Convene. 

As part of our annual planning process, we pick one word that is our “northstar” for the year - for 2022, that word was “Rebuild” and that’s exactly what we did.  After almost two years of being completely shut down from the pandemic, we finally reopened all of our Convene locations around the U.S.  and we also opened three new locations, including a flagship at the iconic Willis Tower in Chicago and our first international location in London at 22 Bishopsgate, the second tallest building in the UK.  I remember vividly our opening party in London and the feeling of immense relief and gratitude I felt knowing that we had officially survived the pandemic and were finally “back.”  

Thankfully we were able to bring back a number of former Convene team members that we unfortunately had to part ways with during the pandemic.  We did, however, staff up too fast, and overinvested in certain aspects of our business.  This, combined with the macro uncertainty, forced us to make some headcount reductions at the end of the year.  These decisions are painful on every level, especially given what we had gone through as a team during Covid.  If anyone is looking to add talent to your teams I’d highly recommend any of the folks that we had to part ways with late last year.    

While our business has recovered significantly (back to 2019 numbers), there is no question that the demand for meeting, event, and flexible workspace solutions has been structurally altered.  I’ve done my best to highlight these changes and some of the workplace trends we’ve observed below, supported by Convene’s own data points.

Events are back, but they’re different:  In 2022, we hosted over 2,700 events with more than 240,000 participants, compared to over 6,100 events and over 360,000 participants in 2019; however, the average revenue per event increased 85% during that time. What this tells us is that big, “experiential” events are back but small meeting demand hasn’t recovered.  This might be temporary or this could be a structural change in demand as certain types of meetings stay virtual.  Good thing for the industry is that most clients’ meeting & event budgets are back to 2019 levels next year.    

Flex WorkPlace demand is strong, but inconsistent across markets & sub-markets:   We’ve passed pre-Covid occupancy and revenue levels across our entire flex workspace portfolio, including properties in NYC and Washington D.C. operating at close to 100% occupancy.  While demand has been strong, it has not been consistent by market (Chicago has been very slow to recover) and desk pricing is relatively flat in the U.S. compared to 2019 piercing levels.  Given the macro uncertainty, economic headwinds, and over supply of flex space in certain markets, we don’t foresee a full recovery in healthy desk rates until 2024 or 2025.      

Every Class-A building needs a flex & amenity strategy:  The flight to quality trend is here to stay and it’s as true for “flex” as it is for Class-A office buildings -- where trophy buildings are performing better today than they did pre-pandemic with average national occupancies of 81% and rents asking as much as $93/SF for in-demand neighborhoods like Manhattan’s Midtown South.  Unfortunately, a new glass LEED & WELL certified tower isn’t enough, and most landlords are being forced to deliver a level of hospitality and amenities similar to that of a 5-star hotel to attract tenants.  We currently have a significant number of deals in our real estate pipeline, 80% of which are via partnership deals with Class A landlords.      

There is no “right” answer when it comes to remote work, but hybrid is here to stay:   The genie is officially out of the bottle and there is no way things will go back to the way they were.  Employees' expectations have fundamentally changed with 78% of employees now demanding some sort of work flexibility.  Investing in people and teams matters more now than ever, and the companies that are responding to employees’ needs are the ones attracting and retaining the best talent.  At Convene, we committed to being a remote-first company in 2020 and now have a team spread across more than 20 U.S. states, the UK, and Bogota, Columbia.  Since making the leap in 2020, we’ve seen a 10% increase in our Employee Engagement Score.  

For those interested in learning more about leading teams and building culture in a hybrid world, Convene shared its expert point of view with Fast Company in the Fall of 2022:

• Amy Pooser, our president and chief operating officer, spoke to the editorial team about building a company culture that drives innovation and success
• I spoke at the Fast Company Innovation Festival about fostering collaboration and connection with a distributed workforce

Now it’s time to dust off that crystal ball and share my predictions on workplace trends for 2023.  Some of these I’ve shared previously, but hopefully this is the year they finally come to fruition.  

Prediction #1: Work from home is replaced by work near home

It’s not the office, it’s the commute.  That’s one of the reasons I’m bullish on premium, flexible workplace solutions opening closer to where people live, including core suburban markets outside of major cities like New York.  Serendipity Labs, IWG, Industrious, and a number of smaller operators have seen real success in these markets and it’s one of the major reasons Convene ended up partnering with the Hudson’s Bay Companies.  We’ll be opening our first suburban locations in partnership with HBC and I’m excited to figure out what the ideal product offering is in these markets.  Hint:  We don’t think it’s an office farm.  

Prediction #2: The workplace of the future is a meeting space   

At our core, we’re social creatures and despite all the advances in technology, Zoom (nor the Metaverse) can’t replace the magic that happens when you bring people together with purpose in an amazing space, with great food and warm hospitality.  We can do individual work wherever, but high impact, team-based work requires purpose built meeting and social spaces with the tools and amenities that inspire collaboration.  Gone are the days of an endless sea of workstations - in fact, 73% of companies plan on making their office 100% unassigned, collaborative spaces.       

Prediction #3: Increased demand for flexible meeting and workplace solutions 

Hybrid work models require a more distributed and liquid real estate portfolio, with the ability to bring employees (or clients) together for a single meeting or give people a home for the day across multiple geographies.  For employees, flexibility will remain the biggest priority, while increasing agility will be the top priority for companies as they look to navigate their way through an ever changing and dynamic world.  Flex is the only solution that solves for both sides of this equation.  It’s one of the reasons that flex space is predicted to make up 30% of the office market by 2030.  

Prediction #4: Half the space, twice the experience 

Employers are looking to attract staff back to the office at the same time they are looking to save money and reduce their real estate costs.  One global Convene enterprise customer recently summarized their strategy with the expression, “half the space, twice the experience.”  A great example of this is at 22 Bishopsgate, where tenants were able to take, on average, 5% less square-footage by leveraging the in-building amenities provided by the landlord, including Convene’s flagship Meeting & Event space.  This is bad news for the office market and is forcing most landlords I know to rethink their amenity strategy and services to retain and attract top tenants. This means more building amenities, more capital, and more operational complexity for landlords - which is why we’re seeing more and more landlords partnering with hospitality providers, like Convene, under management contracts.  Why insource when you can outsource?   

Prediction #5: The industry finally consolidates 

The M&A wave I’ve been predicting for years finally lands onshore (and it might feel more like a Tsunami).  From Covid, to runaway inflation, to a capital markets meltdown, to an impending recession -- to say the flex industry has had a rough ride the last three years or so would be an understatement.  With rising costs, pressured revenues, compressed multiples, limited access to capital, and no clear path to liquidity, many operators (and their investors) will look to merge with or sell to larger platforms that have the scale, brand recognition, and balance sheets to weather the storm.  Throw in a potential WeWork bankruptcy and the treacherous waters could quickly become fatal.  I’ve always believed the future of this industry will look and feel a lot like the hotel industry, with five to six major platforms that operate multiple brands and products controlling the majority of the market.  This isn’t to say smaller operators with differentiated product offerings and deep local knowledge can’t or won’t do well.

In closing, I want to give a special thank you to our clients, investors, landlord partners and most importantly our incredible team for standing by us the last three years.  This has not been easy, nor does the road ahead look smooth.  Success going forward will take courage, resilience, and GRIT.  If the last few years have taught me anything it’s that hope and optimism are our greatest allies.  Despite the obvious challenges ahead, I remain hopeful for the future of our industry and the role that Convene will continue to play as a market leader, partnering with our clients to help shape the future of work.  Cheers to a happy, healthy, and adventurous 2023!  

Don’t stop!