By Colin Cardwell

The news on March 23 of a UK-wide lockdown was just as grim for John McGlynn as for the rest of the business community – though he wasn’t taken entirely by surprise.

The founder of Scottish Capital Partners, self-storage company Storage Vault and flexible workspace company CoVault says the scars acquired during the financial crisis of 2008 had left him in a state of readiness: “I’m in no way complacent but in every business I’ve been involved in since then, the test we have applied is resilience,” he says. 

“Since the experience of 2008-2009 I‘ve been convinced about the need for business continuity so when the guys in head office saw reports of the Covid-19 pandemic and that lockdown was imminent they decided to shut a week before the UK was told to. For them, remote working means pressing two buttons on the telephone system to divert calls to their mobiles, then packing up their laptops and going home.”

McGlynn is used to working remotely: after a pre-restrictions visit to Scotland earlier in March, when he found the country in a rather “eerie” state, he returned to Monaco where he has been resident for the past six years only to find lockdown there applied with even more vigour than in the UK, as the Monégasque police politely turned the fitness enthusiast back if he ventured too far during his hour of outdoor exercise.

The flexible, serviced office market that CoVault serves, with locations across central Scotland and clients that range from bagpipe makers to mobile veterinary services, has burgeoned in recent years, reflecting the changing patterns and preferences of modern office working.

Post Covid-19, McGlynn believes it’s a sector that will increasingly be a model many companies will adopt – including some much larger than many of the businesses that currently find its short-term leases, meeting rooms hired by the hour, and break-out areas so attractive. It’s a market he is intent on expanding. 

Others are eyeing the same prospects.  It’s also a highly competitive marketplace with big operators such as WeWork, Regus and Orega reporting heavy activity last year but as McGlynn points out, there is competition in any area of commercial property. 

“What sets us apart is the quality of the product, the pricing of the product and the high service levels that go with that,” he says.

“Plus, we are long-term annuity investors, with no impatient shareholders and investors to please. Although we are a private equity-style business our focus is very much on the long term; when I buy an asset my starting point is that we are going to hold it for ever. That’s our method of deploying capital.”

He doesn’t deny that times ahead will be daunting: “While I’d like to be wrong, all the evidence tells me that 2008 wouldn’t even register on the graph compared with what we’re about to face.

“Those involved in renting property and the rent-to-rent model will be under increasing pressure and God forbid if you’ve over-leveraged. In fact, if I wasn’t in the sector that I am at the moment I would be selling what I was in and getting into this sector.” 
No matter how well placed CoVault is, he is contemplating some inevitable short-term pain though he believes those like CoVault already in the flexible office space market will enjoy a huge advantage.

“I’m not saying the future is rosy and in common with every other business we expect to see a major downturn. The only point that’s up for debate is how long that will last. However, we’re a well-capitalised business with virtually no debt and for every person who decides they want to continue to work from home via phone and Zoom we expect to see someone who wants to move in. 

“The small, serviced business centre is going to be an asset class that will do well in a U-shaped recovery. Those with the real problems are the property owners who have big spaces that can’t easily be sub-divided – which is very expensive to do.” 
Meanwhile, he says CoVault has been helping its tenants navigate the current crisis.

“Companies can contact their local councils to discuss eligibility for the Small Business Bonus Scheme for the premises they occupy,” he says. 

To apply for this, the first required field to complete is the rates reference number. 

“With 99% of small business owners not knowing what that is – or where to find it – and the fact that it’s difficult to get through to councils which are understandably busy, we sent our tenants a pack to guide them through the process and have had a huge email response thanking us for helping them access that kind of information,” says McGlynn, who also reports a new upswing in enquiries from national brands and large professional services firms asking about available workspace, office suites, communications capability and meeting rooms.  

“The partners at some of these firms have discovered that many don’t need 20,000 sq ft of office space any more; they can take a floor in one of our buildings that may be 2,000-3,000 sq ft and rent extra rooms when they’re required.”

Regarding current circumstances, he points out: “You can arrive and book in at a CoVault or Storage Vault site and don’t have to physically interact with anyone.”

In the longer term? “We don’t have an agenda that says we must do five or 10 deals this year. But we have a lot of confidence in this sector, we’re ahead of our plan and if offered another 10 sites that were good prospects we’d still definitely consider them.”