A day after CBRE, the world’s largest commercial real estate brokerage and services company, announced it would enter the coworking business, several flexible-workspace providers that represent a growing share of the city’s lucrative leasing market said they would no longer do business with the firm.
“Going forward, I see no reason to give my business to CBRE,” said Amol Sarva, co-founder and CEO of Knotel, a coworking company that has rapidly grown into one of the city’s largest in recent years. “If they want to open a shingle that competes with me, I can do business with other brokers. They’re not going to represent us.”
Sarva said Knotel has worked with CBRE in the past. Sarva’s sentiment was shared by other coworking providers, including a founder of Bond Collective, a flexible-workspace provider that recently expanded to six locations in the city but has not worked with CBRE.
“We aren’t going to be calling CBRE,” said Shlomo Silber, Bond Collective’s co-founder and CEO. “It now definitely seems like there’s a conflict of interest.”
It wasn’t immediately clear whether WeWork, the largest coworking company in the city and the biggest tenant overall here, would avoid leasing transactions with CBRE as a result of the announcement. A WeWork spokesman did not immediately respond to a request for comment.
On Thursday CBRE revealed it is launching the coworking brand Hana and would use its deep relationships with commercial landlords to open locations in cities across the country, including New York.
In an attempt to try to distance the company from its lucrative leasing business, CBRE stated that Hana will be a subsidiary that operates within its real estate–investment division, which manages about $100 billion worth of real estate assets for clients and also handles development work.
“The launch of Hana does not in any way change CBRE’s fiduciary responsibility to our clients,” said Brandon Forde, a CBRE executive managing director. Going forward, he emphasized, clients seeking space will be shown all market options. “Hana doesn’t change that.”
The rise of the coworking business has been perceived as both a boon and a threat to traditional real estate brokerage and services companies such as CBRE. Coworking providers have become the most voracious takers of space in the city, paying commercial leasing brokerages millions of dollars per deal for sourcing new office locations.
But as coworking grows, so too have concerns mounted that if they were to eventually encompass vast segments of the office market, they may choose to lease their own portfolios and cut out middlemen like CBRE, depriving the city’s brokerage industry of tens of millions of dollars or more in annual revenue.
“Real estate services firms see coworking as the most disruptive force in the real estate market in decades,” said Jamie Hodari, co-founder and co-CEO of the coworking provider Industrious. “Coworking firms interact directly with the customer, and the role of the intermediary is more ambiguous. Brokerage firms need an answer to respond to that.”
For CBRE, launching a coworking brand may safeguard the relevance of the firm’s brokerage business in the future, Hodari said, by giving it the opportunity to lease up those spaces. Hodari said CBRE’s entry into coworking would not dissuade him from using its leasing services.
“It’s good for us they’re doing it because it continues to validate and draw attention to the fact that companies are finding better workplace outcomes when they take coworking spaces,” Hodari said.
The Yard, another coworking brand, said it would continue to do business with CBRE, but expressed doubt that CBRE would be successful in the coworking industry.
“Coworking is a hospitality business,” said Morris Levy, co-founder and CEO of The Yard. “You can’t expect to just design and provide a physical space and call it coworking.”
If coworking firms choose not to use CBRE, it could cut the company off from millions of square feet of potential leasing deals and millions of dollars of revenue. WeWork has swelled to more than 5 million square feet in size. Sarva said Knotel is now in almost 100 buildings in the city and will have a 2 million-square-foot footprint by the end of the year. He imagines that the company will continue to expand rapidly.
“We’ll be at 20 million square feet in the coming years,” Sarva said. “We’ll continue to work with the other brokerage firms. We value and respect what they do and spend a lot of money with them.”