Mindspace co-founders, Dan Zakai (L) and Yotam Alroy.
New Institutional Investor Support for Mindspace
Mindspace, the global flex office provider, has secured US $72 million of funding in its latest round.
The investment is intended to support the continuation of the company’s growth and its further expansion in Europe, the United States and Israel. The round was led by Harel Insurance Investments and Financial Services Ltd., More Provident Funds, Shalom Meckenzie, Arkin Holdings and existing investors. Existing investors include: Yoav Harlap, Kobi Rogovin and Globalworth.
Founded by Dan Zakai Yotam Alroy in 2014, the company operates 32 branches in 17 cities in seven countries, spread over 100,000 square meters (over 1 million sq. ft). In the past year alone, Mindspace successfully launched new branches in London, Tel Aviv, Philadelphia and a new hub and spoke location outside Tel Aviv, at Yakum. Mindspace serves a wide variety of companies; about 41 per cent are large enterprises and corporations and 38% are small and medium-sized companies. The leading industry types of its customer base are technology companies, financial companies and service providers. Past and present customers include Microsoft, Samsung, Playtika, Taboola, Yahoo!, Expedia and GoPro.
Although many commercial real estate businesses took a hit as a consequence of the Covid-19 pandemic, the flex market continued to grow. All forecasts predict the accelerated growth of the flex industry to reach a market share of more than 30 per cent by 2030; the current market share of flex as part of commercial real estate is 5 per cent. According to a recent study by CBRE, in two years 43 per cent of occupiers will have between 10 and 50 per cent of their portfolio dedicated to flex. In addition, 17 per cent are expected to dedicate over 50 per cent of their portfolios to flex.
Zakai says: “Mindspace is experiencing an impressive growth momentum and high demand in all its locations.
"We successfully faced the many challenges of COVID. Today, our locations are almost at full occupancy and the current investment led by Harel Insurance and More Provident Funds is intended to fulfill the rising demand in the market and to launch new locations in partnership with landlords worldwide”, says Zakai. In addition, he comments that “Mindspace isn’t just another real estate company that rents out offices, but rather offers a strong, strategic partnership to its customers and to landlords. When choosing their office environment, we found that our customers put a great emphasis on their experience: central location, unique design and service of the highest standard. We expect a continued accelerated growth in 2022, while creating a great added value for our many customers."
In addition to its unique community of leading entrepreneurs, business professionals and established companies. Mindspace allows clients greater flexibility, shorter term commitments and lower financial risk, which is important in times of economic slowdown. These benefits explain the global increase in demand for its flex space and many supportive forecasts from industry analysts.
In 2021 Mindspace demonstrated a significant recovery when it reached the pre-COVID occupancy levels of early 2020, and even exceeded them with over 95% occupancy in Israel and Germany. The high occupancy levels are not the result of lowered prices as Mindspace maintained its pre-pandemic prices.
In the past two years, the company has signed six management agreements with landlords in Europe, Israel and the U.S., including for its recent launches in Israel and Philadelphia. A management agreement is a model that is gaining both momentum and recognition worldwide, inspired by the hotel industry. This innovative concept presents a partnership between the landlord and the flex operator, allowing increased profitability and greater flexibility for the landlord, while providing a relevant response to today’s market landscape.
Earlier, in March 2021, Mindspace launched “Hybrid”, a new array of on-demand office solutions for companies and individuals who work under a hybrid model, combining work from home and in-office. The shift to hybrid has been on the rise for a few years and the outbreak of the pandemic has accelerated the process. At Mindspace, the increase of the hybrid trend is noticeable: casual, on-demand contracts have almost tripled in the past six months, compared to the same period last year, pre-COVID.
As part of Mindspace’s innovative development and the current flex trend, tenant experience is taking up a more central position. This experience envelops the customer journey from the first encounter with the office space through the use of the space and its various services, all the way to the end of the work day in the office. Tenant experience is accompanied by technological innovations, such as apps, data-driven insights and personalized activities, that enable the expansion of services and benefits to additional tenants in the buildings.
Sami Babkov, Deputy CEO and CIO at Harel Insurance Investments and Financial Services, comments: "Harel is proud to lead the current investment round with a total funding of $30 million. This investment is an expression of confidence in the flexible workspace model, against the backdrop of COVID’s impact on the office market, and shows confidence in Mindspace’s experienced and professional management team. Through this investment we’re able to diversify and improve our investments in real estate and faithfully serve the customers utilizing Harel’s investment department.
"We believe Mindspace brings an interesting model to the market – both economically and in terms of the value it produces for its customers," says Ori Keren, CIO at More Provident Funds. "In a short time the company managed to create new standards in the market, to build high loyalty among its customers and is experiencing steady growth."
Barak Capital Underwriting, Ltd., served as the investment banker in the transaction.