Cubo’s flex expansion: ‘We’ve barely scratched the surface’

“We have just got sign off from the board for London,” Marc Brough tells me between mouthfuls of lunch over a 1pm Teams call. The news that his flex office business will officially be looking for 30,000 sq ft in the capital is so new that the trusted agent sitting beside him is hearing it for the first time too. “So you need to get yourself down there and get a building tomorrow,” Brough jokes in his strong Derby accent. “I’ll go this afternoon,” laughs Russell Rigby, a Midlands agent for more than 30 years and an integral part of Brough’s team. It’s an easy, fun conversation, peppered with what might be Brough’s favourite phrase: “Know what I mean?” But the informal mood belies a steely focus from Brough, 40 – and all around him – on expanding flex office provider Cubo at rapid pace into the highest quality buildings in the UK’s key cities. Within just four years, the former plumber and his wife Becky, a digital design graduate, have grown Cubo from nothing to a 350,000 sq ft business with 12 sites. To do so, they have proven they can jump through all the necessary hoops to sign leases with institutional landlords and secure big, sought-after corporates as customers. Goldman Sachs, Nationwide, Zurich, Centrica and many more occupy swathes of desks in Cubo buildings. Crucially, that has meant meeting every IT security need of those businesses. “We’ve barely scratched the surface,” says Brough. “It just keeps going – faster and faster and faster.” Last month, the company added Royal & Sun Alliance to its tenant list. The insurance group has taken 250 desks across three sites – Manchester, Leeds and Birmingham. The group wanted to deal with a single provider across those cities and wanted to be in the highest quality space. Overnight sensation It is this corporate world that is driving Cubo’s model. “It could be 50 desks or 100-plus desks. We fill them up overnight,” Brough says. Location and the quality of the building are key. Sound ESG credentials are a given. All Cubo customers can access all Cubo sites and there is a consistency of quality and amenity across them, right the way through to the decision to employ in-house baristas and permanently on-site cleaning attendants across the portfolio. Gyms are also being added at as many sites as possible. Cubo has already launched second workspaces in Leeds, Nottingham, Birmingham and Derby and opened in Glasgow last month. In Manchester, it initially took one floor at the Lincoln Building at the beginning of this year before adding a second to meet demand. Occupancy levels reached 90% in just three months. Small wonder it was determined to bag the former WeWork space at No.1 Spinningfields, signing a new 12.5-year lease with Schroder Real Estate Investment Management last month. More deals on former WeWork sites are in the pipeline and Cubo is also in discussions on sites in Belfast and Dublin. Spinningfields was open within two days of Cubo taking the keys, but there is work to be done to open up some of the space to better suit its corporate members. There won’t be so many smaller offices for two, four or six desks. The Cubo brand may be a relative newcomer in the flex office space, but it arrived on the scene with the backing of the Broughs’ private property business. It has been investing in residential and commercial assets for 20 years, giving it a technical understanding of what can be done within a building. “We entered the market with a cash resource, which allowed us to get the better buildings. We didn’t want to be an occupier who is bottom feeding. It was always the intention that if we can’t get the best building in the city, then we won’t go to the city,” Brough says. In Edinburgh, for example, that means 40 Princes Street in the city centre. “I do believe we’ve got the best building and the best product, which means we can charge a reasonable price,” Brough says. “It all fits hand in hand.” Cubo’s portfolio Birmingham 2 Chamberlain Square Landlord: Paradise Circus Limited Partnership (Birmingham City Council and Federated Hermes) Derby The Old Post Office, Victoria Street Landlord: Staton Young 1 Pride Place, Pride Park Landlord: Staton Young Edinburgh 40 Princes Street, Edinburgh Landlord: Remake Asset Management (bought from Redevco last year) Glasgow Aurora, 120 Bothwell Street Landlord: Forma Real Estate Fund Leeds 6 Wellington Place Landlord: Federated Hermes Manchester The Lincoln, Lincoln Square, Brazennose St Landlord: M&G Real Estate No.1 Spinningfields  Landlord: Schroders Newcastle  Bank House, Pilgrim Street Landlord: Taras Properties (Reuben Brothers) Nottingham Fenchurch House, 12 King Street Landlord: Staton Young Standard Court, Park Row  Landlord: Euro Property Investments Sheffield 38 Carver Street Landlord: Sheffield City Council The couple had fallen into running a couple of old-style serviced offices in Burton and Derby and built on this to create their Staton Young business, which now owns serviced offices across the Midlands. Then in 2019, they bought the Grade II listed Old Post Office building in the centre of Derby, which had been used as a bar. Around the same time, the couple “poked their heads into a WeWork for the first time” during a trip to London. “My wife told me, ‘that’s what we’re going to do next’,” Brough recalls. The Old Post Office became the first Cubo, opening in February 2020, just four weeks before the first Covid-19 lockdown. But the uncertainty of that time, and the crisis it fomented at WeWork, did nothing to dampen Brough’s excitement about the sector and its prospects. Through the roof The big challenge in securing space has been breaking through what Rigby calls the “institutional ceiling” – convincing the funds and propcos that own the best buildings that they should risk dealing with a new company. “A lot of the time, the owners of these buildings won’t take flex operators with management agreements because they don’t have to. They can demand big leases and big sums,” Brough says. His knowledge and personality – an infectious enthusiasm and die-hard commitment to his business – seem to have been a key part of getting a seat at the table.  The couple owned the business until May last year, when its private-equity-ready growth strategy paid off with the sale of a minority stake to Literacy Capital, the listed investment company led by Capita founder and former chief executive Paul Pindar. Brough recalls how he and Pindar immediately got on “like a house on fire” following an introduction by Cubo director Leon Keller. “They have been absolutely brilliant,” says Brough, citing Literacy’s swift support when a deposit was required in a 24-hour timeframe to secure the new Spinningfields lease. Literacy’s backing has given Cubo the confidence to push faster and harder for expansion, spurred on by the uptick in demand from customers at around the same time. “Demand from that point started to go through the roof,” says Rigby. It was also swiftly followed by a £6m term loan facility through NatWest’s Mid-Market Growth Fund programme to recapitalise £4.6m of loan notes as well as fund the capital expenditure for the new sites in Cubo’s pipeline. The minimum lease length Cubo will take is 10 years. It has several 15-year leases and a 20-year lease in Sheffield. “We want longevity in the business,” Brough says. “We want to stretch it out.” It’s all about offering the security that blue-chip customers crave. One bank, for example, was adamant that it would only take space from a provider if it was leasing the space rather than operating it under a management agreement, because it  did not see this as secure enough. It has been the same story from three or four other big, institutional blue-chip firms, Brough says. “They need the comfort that we are locked in. Our deal with the landlord is important to them.” WeWork’s problems “100%” cemented this need. “The bigger occupiers want to understand our financial backing, the strength of the business,” he says. Once an occupier is in, they tend to stay longer than they planned. Zurich, for example, moved into Cubo’s Newcastle office to run a short-term project. He says: “They made it very clear they would be leaving after six months, but after four months they signed a lease for three years,” says Brough. “The same happens time and time again. Once corporate businesses get over that first hurdle, once they get in and see how their staff work differently, interact differently and the community and everything else, then it’s hard to leave it. “Why would you go back to a sterile environment where only your staff are, where you’ve got to look after it, maintain it, insure it? You’ve got all the problems. You’ve got to employ a receptionist, an FM manager. Why would you do it?” Brough asks. The decision to look for a London site – most likely in Mayfair, Soho or Holborn – seeks to meet members’ desire to replicate the same experience in whichever city they are in. Brough only sees demand for flex space growing: “Some have jumped already, some will jump next year, some will jump the year after. Some are waiting for lease events to happen. You know what I mean?” The answer from more and more blue‑chip corporates seems to be: “Yes.” All images from Cubo