M&A trends in the corporate real estate consulting sector

13 June 2019 Consultancy.uk 4 min. read

Last month saw the sale of independent corporate real estate consultancy Incendium Consulting to global flexible workspace specialist Instant Group in a deal that confirms changing mindsets in the corporate real estate. Livingstone’s Lewis Gray, who led the sale of Incendium, discusses the deal and the changes to the M&A landscape for the specialist corporate real estate consulting sector in the UK.

For many years large corporates have relied on the established global corporate real estate (CRE) service providers to source new office space and supporting services. Whatever the commercial driver – whether it is supporting headcount growth, a temporary requirement to service a large one-off project or launching into a new geography – the options available were limited to often uninspiring workspaces requiring long term lease commitments. In the face of a commercial operating environment characterised by shortening planning horizons due to global political and economic uncertainty, this has become an increasingly unattractive option.

The emergence of the gig economy, illustrating the benefits of greater flexibility of access to other key business resources like people and technology, in combination with changing employee expectations about their working environments as the millennial generation emerges, has brought this model into sharper focus as corporates demand better solutions.

This has facilitated the rise in the number of flexible workspace providers like WeWork, The Office Group and IWG. These challengers offer aesthetically pleasing and functional office spaces, employee wellbeing initiatives and the most obvious yet important characteristic: flexibility. The number of flexible offices in London has increased rapidly in recent years and London remains the global capital for co-working spaces, ahead of New York, and has successfully attracted the world’s biggest brands such as Amazon and Deutsche Bank as serial users.

"Growing demand for the flexible workspace model is attracting significant interest from investors."
– Lewis Gray, Livingstone

As real estate solutions providers continue to innovate further still, CRE specialists like Incendium that can support quick and effective strategic real estate decision making through its support and advice have become ever more valuable. The next step is to develop these property-led solutions beyond real estate and into a full ‘CRE as a service’ which takes the range of real estate and ancillary support services, centralises procurement and provides a holistic outsourced corporate solution.

M&A sector trends

The growth trajectory of the flexible workspace model over the last five years has attracted significant direct investment with property owner-operators like WeWork and The Office Group receiving backing from Softbank and Blackstone respectively.

Outside of these hybrid owner-operator models, flexible solutions provider Instant – the ultimate acquirer of Incendium – also received backing from UK-based investor Bowmark Capital in the summer of 2018. The traditional corporate real estate service providers have also been investing to keep pace, with JLL leading an early funding round for US-based digital office broker Hubble, indicating their belief in a paradigm shift towards the flexible model. Corporate demand for expert strategic real estate support has created an emerging audience of independent specialist consultants and makes the deal between Incendium and Instant a fairly unique deal of its kind, but unlikely to be the last.

Set up by its six founding partners in 2015, Incendium provides large real estate services procurement, consulting, and change management programmes to blue-chip clients. Incendium is uniquely positioned as an independent provider in the CRE sector and Instant Group is increasingly being asked to deliver ever more complex global solutions for some of the world’s largest organisations. Incendium had reached a point where they saw the clear market opportunity and believed that the right support and investment from a complementary partner would allow them to continue to grow and tap into its global client-base to serve an obvious demand.

With this objective in mind, Livingstone was appointed by the shareholders of Incendium to advise on the investment in the company. It became clear from very early on that bringing Instant and Incendium together would give clients access to independent market-leading consultancy, world class data and delivery options that transform their approach to workplace in what is a truly distinct offer in the market. The strategic and cultural fit with Instant was clear and has provided a unique proposition to the sector which will surely make others sit up and take notice.

Lewis Gray is an Associate Director at Livingstone, an international mid-market M&A and debt advisory firm, with offices in Beijing, Chicago, Düsseldorf, London, Los Angeles, Madrid and Stockholm. Livingstone helps shareholders in several sectors – including professional services and consulting – with exits and growth investments.