In this series of articles we explore the complex dynamic between providers of coworking space and the intermediary companies that supply them with client enquiries, to understand: what is an office broker and how do they work?

Understanding how this landscape is evolving and how it impacts the customer journey in search of their perfect flexible office will provide important insight to make the relationships involved more transparent and easy to navigate.

In the previous segment of this series we covered:

• Understanding how coworking brokerages are paid for their services
• How this concept changed as a result of increased competition

This segment focuses on: is segment focuses on:

• How changes in fee position arrangements changed interaction with customers
• The complexities this introduced into the relationship between brokers and office operators
• The impact on customer experience

What is an office broker? Evolution, Complication

The incorporation of the “Overturn Rule” (see previous parts in this series) was important for brokers, coworking operators and clients looking for office space.

Since the surest way for a broker to secure a guaranteed fee position with an operator was for a client to attend a viewing, the focus shifted from getting the lead introduced as quickly as possible to building good enough rapport with the prospect to secure a commitment to view at a future date and making sure the client then turned up.

But the transition was messy – the UK online brokerage marketplace doesn’t benefit from a formal governing body so there is no all-encompassing charter to distribute these changes throughout the coworking operator landscape.

For coworking operators, the change introduced a big chunk of administrative complexity – now they had to proactively notify brokers when fee positions changed as a result of a client’s completed viewing. Needless to say, those on the receiving end of bad news regarding their fee position generally didn’t take it well.

Adhering to the letter of the new law meant that a flexible office operator might be put in a position where they had to break bad news to a brokerage that historically generated them a lot of new business, for example. There was a wide range of possible relationship conflicts due to the increased competition.

A quick segway on the mechanics of how an introduction in the coworking marketplace works in an ideal world:

The historical rule of “first past the post” to determine fee position was really simple because it allowed for a very pure exchange of information.

An introduction from a brokerage to a coworking operator would be made on the basis of the client’s information being sent across as a formal introduction of the prospect to the building – company name, name, telephone number, email, number of people required, preferred location, supporting qualification notes etc.

The coworking operator would then be free to initiate direct contact with the client in an effort to champion their product.

This makes sense from a business relationship perspective:

The online brokerage is responsible for gathering lead flow from prospective clients searching online and introducing them to a cross-section of the most suitable coworking operators alongside the most relevant information that helps the operator position their pitch.

The operator employs sales teams responsible for winning the client over through the strength of their proposition and those sales teams need to engage with the customer in order to do so.

Once the operator wins a client’s business, they will pay the qualifying brokerage a fee for introducing the client in the first place.

What is an office broker? They act as a guide and information conduit between the operator and the client, making sure the deal process moves along quickly, gives the client advice and support on negotiation techniques and provides useful strategy insight to the operator about how to position their offer from a contractual / monetary perspective.

As long as a single coworking brokerage is shepherding the client through the sales journey then all parties can focus on what’s important.

But clients’ online habits remained unchanged – they would continue to register their interest with multiple intermediaries in the belief that this would give them a greater depth of exposure to the coworking landscape. Oftentimes different people within the same organisation (office manager, PA, executive, HR) involved in the search for new flexible offices would register with different brokers independently of one another, and sometimes without each other’s knowledge. Again, this is not wrong or unusual, it’s an expected pattern of browsing behaviour.

So, if a client did not commit to a viewing date during the initial qualification call with the broker (for any one of a hundred different reasons and circumstances), brokerages would be put in a position where they were sending through customer contact information to coworking operators with the possibility that they did not carry the “first past the post” fee position because they were beaten to the punch by a competing firm already.

Operators would get in contact with the newly-introduced prospect regardless of who held the fee position – after all, the fact the client was introduced for a second time is not their concern. The search for flexible offices was still clearly active and a second touch point is important in terms of the customer’s discovery and purchase journey, so should be used to it’s full effect.

The coworking operator in question is also already on the hook for paying a fee to a brokerage – they don’t care where that fee goes as long as they win the client’s business.

The client doesn’t care who gets paid or why someone doesn’t get paid. All they care about is finding the right office at the right price.

The only party impacted in this interplay is the coworking brokerage that loses out on a commission fee despite allocating resources to source, qualify and introduce an interested prospect to the marketplace.

What is an office broker: information control

Brokers responded to this perceived increase in their risk exposure by controlling key information at the point of introduction to coworking operators – specifically, the contact details of the client.

Some leads were introduced with the company name, contact name and email address but without the telephone number. Some didn’t have the phone number or the email. Some only had the company name. Some didn’t have any information at all, just the parameters of the office space required.

Some brokers went even further and adopted a more risky policy of not making the introduction at all until a viewing date and time were secured from the client and they could guarantee the fee position through the completion of a viewing.

Ironically, whilst these policies were adopted as a direct response to a change in the rules of engagement from “first past the post” to “the overturn rule” to give flex space brokerages more control in their ability to win fee positions, they also addressed a fundamental customer-side issue.

The biggest frustration for customers seeking coworking space through online brokerages is the fact that their details are introduced to the flex space operators and that those operators can proactively reach out to them (by whichever means they choose – phone or email etc.) to introduce their product range and encourage the client to come in and have a look around.

This is just fine as an idea, but the coworking sector comprises a vast range of brands and product choices, with some geographical locations being highly saturated. Some operators will be less proactive than others in reaching out to new prospects, but some are quite a bit more proactive.

If a coworking brokerage receives an enquiry from a client and then introduces that client’s requirements to 20 separate coworking operators (which is not unusual) but leaves the client’s contact details on the introduction, then the client is liable to be flooded with calls and emails from the operators if they are all proactive – in the client’s mind, this defeats the point of having gone to an independent intermediary brokerage in the first place. Not to mention being massively annoying.

For clients engaging with brokerages in the flex space sector it is not immediately clear that these are the rules of engagement by which they operate. The fact that contact details and information are exchanged between one party and another (the broker and the flex space operator) in return for a fee down the line is not explicit and is the most common cause of complaint from clients when they are contacted by operators introduced by the broker without expecting it to happen.

So the drive by brokerages to protect their fee position by withholding customer contact data from their introductions (to better protect their ability to control completed viewings when they are able to arrange them) unintentionally served to offer the customer a layer of protection from the thing which most infuriated them about the coworking brokerage model – unwanted and excessive contact levels directly from flex space operators.

This quickly became a de-facto USP for brokerages, especially the larger the size of a requirement was – the customer message was “we’ll protect you from unwanted contact by keeping your details confidential” and act as a central point of resource to handle everything. This is perfect for the consumer – it’s exactly what they want and expect from a conventional agent/client relationship.

Unfortunately this did nothing to make coworking operators happy.

Information bottleneck

We are talking about thousands upon thousands of new enquiries every month from a large number of intermediary sources and dedicated teams within operator businesses to reach out to them. As the proportion of introductions without viable contact details continued to increase, a larger bulk of time was spent chasing the introducing brokerages for updates, contact details etc. This made the sales departments within flex space less efficient since they were hamstrung by an inability to speak with the client directly.

Many coworking operators therefore adopted the stance that they would not accept (grant a fee position) for an introduction which did not come with direct contact details for the customer, or at least a minimum level of contact information.

Others evolved their definition of granting a fee position even further – granting the eventual fee to the coworking brokerage that arranged a completed viewing at the building where the client eventually took space. This meant that multiple brokerages could potentially arrange multiple viewings for the same client at different properties within the operator’s portfolio. Great for the building operator, since the customer would get wider exposure and “eye-time” on their brand, but infinitely confusing for the brokerages (and for the customers, who increasingly became directly involved in the debate around which brokerage should be paid and why).

More and more often, the debate around which brokerage should be paid a fee moved to a discussion around which brokerage had a greater degree of control in their relationship with the customer and whether they could exert sufficient and appropriate influence in the deal to allow the coworking operator to win the client’s business.

So ultimately the evolution of the brokerage fee position model from “first past the post” (first to introduce) to the “overturn rule” (first to arrange a completed viewing), whilst created with the intention of rewarding the most proactive coworking brokerage that got the client through the door to have a look around, actually had a number of negative impacts.

What is an office broker: implications of changes

Firstly it led to stagnation in sales process momentum as a greater and greater proportion of coworking brokerages removed contact details from customer leads (especially the larger ones which commanded greater fee positions for brokerages and accounted for the largest revenues for operators).

Secondly it led to flexible office operators adopting variations to the accepted rules of engagement in an effort to maximise their chances of winning new business, but in the same stroke diverging from common practice and creating confusion around what was and wasn’t allowed – opening up scope for discussion on what else a brokerage might or might not be able to do so as to gain a fee position.

Thirdly it led to customers being dragged into discourse on whether one coworking brokerage or another had their best interests at heart and how this could be demonstrated, despite the fee position element of the coworking brokerage / operator relationship having nothing to do with the customer in real terms.

Most importantly, the concept of brokerage fee position increasingly changed from one of a rigidly predefined set of rules to one where there was leeway to nudge the outcome one way or another, or at least to try.

As the coworking brokerage landscape exploded in size in the run-up to the Covid-19 pandemic and beyond it, instances of inter-brokerage fee disputes increased dramatically.

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In the next segment of this what is an office broker series we will look at:

• How pre-pandemic growth of flex enticed “big agents” to enter the arena
• The impact this had on brokerage/operator market dynamics
• How “client relationship” and “value added” are growing in importance and influence