Recently Euan received a Cadburys Creme Egg – I remember when you only got them at Easter yet here we are in November!. The first thing that came to my mind was “how do you eat yours?” which is a broad question you can adapt to thinking about where we work “where do you do yours?” The debate continues to rumble but moving through the office vs remote discussions to look at how real estate will be impacted by the rise of space-as-a-service.
This is nothing new but its symbolism is growing. I used to work with a client that used Regus offices for their head office. We are talking about 10 + years ago and to be honest the offices were not good. It oddly reminded me of school. There have been improvements to Regus but new operators in the sector have been materialising for many years since. The one most people think of is WeWork but others like Convene, Industrious and some dabbling by the larger REITs in new brands.
There has been a move away from long term commitment in real estate for a number of years. The pandemic however has catapulted the need for flexibility into the forefront of ALL organisations. This has in turn put the spotlight on existing co-working / flexible operators and encouraged more to enter the market. Existing landlords are looking at how they can partner on their existing space to create premium space that people want to work, meet and host events.
If you look at organisations – large and small – over the years they have grown in how they use technology. The individuals they employ have grown in terms of their wants and needs – and in most cases employers are looking to accommodate them. Larger organisations particularly have to cater for a wide range of needs and wants. There is therefore a key gap here that a traditional lease will struggle to cater for. The capital expenditure alone to create spaces that people now want to work in has grown exponentially. People (and by this I mean both organisations and individuals) need choice. The traditional real estate model doesn’t necessarily offer this and as such flexible coworking operators play a key part to filling the gap.
The pandemic really did support a more focussed move to new ways of working – individuals and organisations have reevaluated their relationship with the office – adapting culture and looking forward, rather than backwards. Now this isn’t every entity and frankly those who stick to a fixed “office” culture have serious things to think about but across the board that re-evaluation has changed the way we work.
So ultimately the forward looking organisations look more to what space they need and when they need it. Think of our TV viewing – we look more on-demand. We do this with our travel needs, our books and our music. We look to ondemand for so much – so why not accommodate our employees in a more indemand way.
Utilising space differently though is much more than this. The rise of technology is changing how we all work, live, play and learn – so it would naturally impact commercial real estate. Break it down. Using the space only as you need it must be cost beneficial to a business. Flexibility provides freedom. No long term commitments. The benefits to having choice are quite clear. The supply available to organisations is looking to match the demand too. Real estate is becoming more about providing a service (and charging for said service) than simply a transactional relationship. The unbundling of real estate can help drive value for all parties. What services do you want – offer them and then get them to pay for them!
So commercial real estate transformation has occurred. Providing services is their future. Creating an experience for the users of the real estate is paramount. Creating this experience will involve using data to understand existing users. Those who don’t adapt will end up no longer wanted.