Flex space co. Mindspace raises $72M for push into US market

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Mindspace, the global flex office provider, announced that
it has secured a funding of $72 million.

The investment round 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.

Mindspace, founded in 2014 by Dan Zakai and Yotam Alroy, currently operates 32 branches in 17 cities in seven countries, spread over one million square feet. In the past year, Mindspace launched new branches in London, Tel Aviv, Philadelphia and a new hub and spoke location outside Tel Aviv. Mindspace serves a wide variety of companies; about 41 percent are large enterprises and corporations and 38 percent 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, GoPro, and more.

Dan Zakai and Yotam Alroy

While most of the commercial real estate industry took a hit
as a result of COVID, 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% by 2030; the current market share of flex as part of commercial real
estate is 5%. According to a recent study by CBRE, in two years 43% of
occupiers will have 10-50% of their portfolio dedicated to flex. In addition,
17% of occupiers will have more than 50% of their portfolio dedicated to flex.

“Mindspace is experiencing an impressive growth momentum and
high demand in all its locations”, says Dan Zakai, CEO and Co-founder of
Mindspace. “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.”

Zakai added, “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 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, Mindspace 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.

Under a new management agreement with an affiliate of Rubenstein Partners, Mindspace opened its first location in Philadelphia at The Wanamaker Office Building (pictured top) in February last year. The new location comprises approximately 42,000 s/f of flexible office space, events area and tenant lounges.

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.

Sami Babkov, Deputy CEO and CIO at Harel Insurance
Investments and Financial Services, Ltd.: “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.

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