The commercial real estate landscape is always changing, and one of the biggest factors driving change today is the growth of shared workspaces. This presents challenges to traditional building owners, operators and brokers. But shared workspaces also present opportunities, if property providers are nimble enough to take advantage of them.
Antony Slumbers is a professor at the University of Bristol in England, working at the intersection between real estate and technology. He opened the FlexOffice 2018 conference, hosted by NAIOP and the Global Workspace Association, with a keynote speech about how to win in the future world of CRE.
“The nature of work is changing,” Slumbers said. Many jobs that exist today – perhaps as much as half – will soon be automated. He said people in the future must focus instead on “new” work, things that can’t be done by computers. “An office that is designed around ‘old’ work will be obsolete,” he warned. Those offices will be replaced. “The office is dead. Long live the imaginarium.”
That means creating spaces where people can be creative and productive. Slumbers warned that this isn’t happening in traditional buildings: “Only 57 percent of employers think they have a productive workforce.”
And there isn’t much time to lose. The future of CRE, Slumbers said, is already here. Half the companies in Asia are using flexible workspaces, and 90 percent are considering it. Most Americans work for smaller companies that don’t need to rent large spaces for long lease terms.
“The real estate industry is no longer just about real estate,” Slumbers said. He believes that means CRE providers will have to learn new ways to sell their products. Instead of offering to simply rent space to tenants, real estate providers should focus on helping their customers achieve a “productive workplace.”
Slumbers listed eight factors that CRE professionals should consider as they think about what they need to deliver in the future:
- Are you “involved” or are you “committed?” If you simply want to own property and rent it out, you are “involved.” This means you may be able to get by, but that you’ll be leaving a lot of money on the table. Owners will need to be “committed” to providing services if they want to succeed.
- Make the move from “Rent Collector” to “Service Provider.” Future tenants will want more than physical space. They’ll want services they can rely on.
- Create new models for valuation. Buildings, he said, will be judged on whether they are “flexible.” Can people do many different tasks there, and move quickly from one to the next? Those factors are likely to make a building valuable.
- Man plus machine wins. Slumbers called this the most important factor. Humans have skills that computers never will have. But computers can move at speeds humans will never be able to. Buildings in the future need to bring people and machines together in ways that allow them to help each other.
- Embrace multimodal occupations. CRE providers in the future will be selling a service (places where people can work), not a product (a building). Owners will need to work with customers to provide both space and services that customers want.
- Build your brand. Customers need to understand what they’re getting when they use your space. Buildings will be branded, just as cars are today, with some brands valued more highly than others. The best brands will command the highest returns.
- Operators need to move from “zero” to “hero.” Property managers create the user experience, Slumbers said. He urged owners to think holistically, delivering expertise in many areas. Building managers should be real estate experts, but also engineers, data scientists and hospitality experts.
- Take a cue from the iPhone. Globally, Apple controls 18 percent of the smartphone market. But the company earns 82 percent of smartphone revenue. Apple does that by providing a superior user experience. CRE providers will need to do that as well. The best providers will command the lion’s share of the profits.
Slumbers said workspaces will actually become more important even as the nature of work changes. People won’t want an “office,” but will demand a “productive workspace.” One way to deliver that workspace is to focus on smaller spaces. Instead of concentrating on delivering big buildings, owners will need to deliver “space as a service.” That means finding ways to break those big buildings down and offer customers 10,000- or even 5,000-square-foot segments.
The future will be “flexible.” That means shorter leases, and landlords will need to be more involved to make certain they are providing cutting-edge technology. Real estate is moving from a product to a service, Slumbers added. Providing the best service, he concluded, is “how you win in the future.”
Rich Tucker is Director for Public Policy Communications at NAIOP, where he develops and executes communication strategies to raise the visibility of NAIOP’s advocacy work on behalf of the industry