“There is ‘work fatigue from home’ and this creates demand for our product”

by time news

The eruption of the corona that led to significant rates of workers around the world moving to work from home and the resounding collapse of WeWork, the icon for renting workspaces, cast a heavy shadow over the work model that had so far grown impressively.

Even in MindSpace, the company that offers other companies and freelancers boutique workspaces, admits that 2020 was not an easy year at all. “We are not one of those companies that would say that the Corona has grown us, because we too were hit hard when the plague broke out,” says Dan Zakai, CEO and co-founder of Mindspace in an interview with Globes.

However, after overcoming the initial shock, MindSpace demonstrated a significant recovery in 2021 when it reached the occupancy rates of early 2020 before the outbreak of the corona, and even passed them, with over 95% occupancy in Israel and Germany.

“Even before Corona we identified two main trends in the labor market. The first is that large companies are increasingly adopting the use of flexible work spaces. Some companies decide that part of their real estate portfolio should be flexible and not fixed with ten-year contracts.” Working.

“The second trend comes from office owners who feared they would not be able to rent all their offices. Therefore, about three years ago we made a change in the business model. Until then we would rent the offices from their owners and operate the complexes, and due to growing demand For them, as we did about two weeks ago in the universe together with JTLV, “explains Zakai.

What led to the return of employees to offices?
“The corona, as in many places, has accelerated both processes – on the one hand demand for flexible work space from all types of companies, small and large. Today there is very great uncertainty in the markets about when to return to work and whether the model will be hybrid (work from home and home). Companies all over the world are looking for a model where they do not have to commit long term and invest money in offices and this has increased the demand for our product dramatically.

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“At the same time, if in the past property owners looked at this flexibility as’ Nice to have ‘, today it’s a must.’ Stay with empty offices. “

Why work from work spaces when you can work from home?
“It is true that the work environment changes and that it is possible to work from home, but at the same time the office does not go anywhere. There is what is called ‘work fatigue from home’ and managers want office workers at least part of the time. And work as a team.This new situation is exactly what produces the tide to our product.Companies still want to work from the offices and the demand we see proves it.

“We offer a premium product that is very focused on the employee, so that he gets a much better experience from the competitors and also from the firm that the company created for him. Today in order to bring in employees and recruit the talents, the work environment needs to be perfect.”

Mindspace offices

“The Israeli market was one of the first efforts”

MindSpace was founded about seven years ago by Zakai and his partner Yotam Elroy. Today, MindSpace operates more than 32 branches in major cities around the world – Tel Aviv, San Francisco, London, Amsterdam, Berlin, Warsaw and more. The company employs 160 people, 73 of them in Israel.

To address that surge in demand for workspaces, MindSpace went private this week, raising $ 72 million from a line of investors. The round was led by Harel Insurance and Finance (which alone invested $ 30 million of the amount raised), Mor Gamel, Shalom Mackenzie, Arkin Holdings and existing investors. The recruitment was led by Barak Capital Underwriting.

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What characterizes the market in the country compared to other places?
“The market in Israel is one of the first efforts of using flexible workspaces. Maybe this is because there are many innovative companies in Israel and at first this model was perceived as innovative. Customers here know what they want for their employees and for themselves, and large companies adopted this solution several years ago. What is also quite noticeable is that there is a huge demand for offices in the market here since the end of 2020, due to the high-tech boom that required premium quality offices, the arrival of vaccines that allowed early return to work and the fact that Israelis wanted to strengthen offices very quickly. “.

Can it succeed in the periphery as well?
“Until two weeks ago when we set up the center in the universe we were always focused on city centers, only big cities. Tel Aviv, London San Francisco, the reason is that when we set up a complex it is a premium complex, with a team that serves a variety of companies and needs a certain size. “Recently we see that there is more demand in areas outside the city centers and in the universe we are seeing very good demand, so we are considering expanding to other areas.”

“Looking at how to grow carefully”

Last week, Wework, the company most associated with the field of work spaces, founded by Israel Adam Neumann, published its first reports after the merger into SPAC in October.

While Wework slightly reduced its losses from $ 941 million in the third quarter of 2020 to $ 802 million in the third quarter of this year, they are still large sums. Since the $ 9 billion merger, the company’s value has dropped to about $ 6.72 billion, after the share price fell 12% from the day before the merger.

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What is the difference between MindSpace and Wework?
“There are quite a few differences, and obviously they are a much larger company than us. But they focused on growth very clearly, while we alongside growth, which is smaller, focused on producing profitability. While they are a company that produces losses we are a company that looks at growth but in a controlled and careful way.

“The second thing is that we have changed our business model and are working together with the property owners, whether in a management agreement or in profit sharing when the strategy is to grow together with them, while they have embarked on an IPO. “The Corona and we are in a period of growth, they are in the process of streamlining and closing complexes. Finally, at the product level, our product is more premium, boutique, and we try to maintain the quality and only be in places that are economically winners.”

Mindspace

Field of Activity: Construction and rental of flexible work spaces
history: Founded in 2014 by Dan Zakai who serves as CEO and Yotam Elroy, who serves as chief business officer
data: The company has 32 work spaces and employs 160 people, 73 of them in Israel

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