Sam BerrySam Berry
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Ryan Simonetti has been here before. No, he has not been through the brut of a global health pandemic, much less guiding an eleven-year-old company that he co-founded through the national lockdown – but he’s no spring chicken either. His entrepreneurship roots run deep; raised by a father who was a small-business hospitality entrepreneur himself, Mr. Simonetti put himself through college by relying on a smart, and rather simplistic, business model: “If you bought something at Villanova University in the early 2000’s, there’s a good chance I sold it to you”. Mr. Simonetti spent a year in the global real estate group at Lehman Brothers following graduation, before leaving to join Gramercy Capital, chasing a desire to work closer to the asset. The years that followed, Mr. Simonetti claims, contained the best career experience he could have ever received. He believes that the true value of working in what was a small business at the time, is that when there is a task to be done, those who volunteer their hand are usually picked to help. Mr. Simonetti just so happened to raise his hand in 2009, and as Vice President, helped lead Gramercy Capital’s loan workout and restructuring strategy, not only improving his business skills by going through the fire, but studying and learning many lessons about people during the process. So yes, Mr. Simonetti has been here before.
“The hardest step is the first step”, Mr. Simonetti expressed, describing the leap of faith it takes to go out on your own in the business world. Mr. Simonetti co-founded Convene in 2009, with a business model of infusing hospitality into office buildings across the world. 2009 was an accelerator for the amenity lifestyle we have grown to expect out of our spaces today. Ian Schrager’s boutique hotels spurred inspiration and duplication by the masses; Equinox was beginning to redefine the fitness experience; Convene had set out to change the workplace experience.
Today, Convene is a meeting and workspace operator in six cities across the United States, plus London, whose strategy is to “create your best day at work, wherever it happens”. The latter half of the prior quote did not exist six months ago, as Mr. Simonetti provided foreshadowing into what he considers “Convene 2.0”, or, post-COVID Convene. However, in the ten-and-a-half years that preceded COVID, Convene came to market as the premium-level business outsourcing host, whose competitors are not, and never were, the co-working WeWork’s of the world, but rather the actual business customers themselves. Convene’s product offers healthcare, childcare, fitness, cafés, and concierge services, among others. His pitch to these businesses in need of more workspace for employees, training centers, conferences, company-wide meetings, etc. is that outsourcing to Convene requires less invested capital, lower operating costs, and returns a higher quality space experience than expanding their own physical footprint. Additionally, Mr. Simonetti firmly believes that Convene’s presence in an office building significantly moves the needle on underwriting metrics for landlords. For example, when landlords partner with Convene during the lease-up phase of a value-add building, rents, renewal probabilities, tenant retention rates, and downtime assumptions all improve significantly from the industry average, Mr. Simonetti’s data claims. But what happens when physical office spaces close and employees are forced to work remote?
Coined as “Convene 2.0”, Mr. Simonetti has classified his company on a different level than how it previously existed just six months ago. Describing the pandemic’s effect on the business world, he purports COVID is acting as “the great accelerator”, and that he has never seen a more opportunistic time period. However, that does not mean the past six months have been easy for business. Convene’s executive team has been forced to re-think whether they even need to be in the physical space business, or if growing as a technology/digital company is a safer and smarter transition. In outlining his company’s plan of growth for the future, he says that the decisions made since March 2020, and those to be made in the near future, will define Convene for decades. Settling into those decisions has forced eight post-COVID observations to the front of Mr. Simonetti’s mind, the first of which deems COVID as “the great accelerator”. Secondly, he believes in “the rise of the rest” – a second wave of urbanization, not suburbanization, to desirable cities in lower-taxed, lower-cost states, particularly in the South. Third, that “technology will lead commercial real estate into the future” – exemplified by Convene’s strategy of bringing software engineers on-staff and recently launched virtual meeting space platform. Fourth is, the “consumerization of real estate” – Mr. Simonetti’s team now must sell their virtual product to each individual remote worker, rather than the business employer. Fifth, “access is the new ownership” – comparing the shrinking margin between average office lease terms and average life spans of new companies. Sixth, “the future is flexible”, and will be fought with “speed and agility”. “Adaptive reuse takes center stage” is his seventh observation, claiming the United States is overbuilt with retail and office space, explaining his bullish opinion on retail conversions into Convene-type workspaces. His eighth, and final, observation is that “capital markets will finally catch up”, and in two-to-three years the debt and equity markets will have figured out how to accurately value the industry-disrupting mixed-use space innovations, such as Convene’s.
“The future of office is hybrid and there will be a flight to quality”, Mr. Simonetti purports – a theory on which he has pushed all his chips to the middle. Remote working is the new normal, and seems to be the reality for the foreseeable future. But for a physical space operator which prides itself on a high-quality touch-feel-interact type of experience, there still seems to be a profitable way forward. “The hardest thing and the right thing are the same thing”, and through turbulent times, Mr. Simonetti has set a clear path for his company into the future. In advice given to him from a legendary restauranteur when asked what the key to service is, the response was: “Hello, coffee, goodbye”. How good is the experience entering the space, working in the space, and leaving the space? While exterior factors beyond Mr. Simonetti’s control will evolve the meaning of those three touchpoints, Convene is steadfast in its continued pursuit to raise the bar on workspace experience – wherever that may be.