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Another pre-COVID trend that is likely to be accelerated due to the current pandemic is commercial real estate’s shift from being seen as a product-based business to an industry much more focused on real estate as a service.
The shorter the average lease terms get for office tenants, the less passive the investment, the more constant the sales cycle and the more important the building brand becomes.
These are aspects many owners were not built to manage, and many leasing teams do not have a process for. This will create a gap for a number of landlords, between ownership and management, creating an opportunity for “operators”. The operators could be anyone who decides to supply the services, but coworking operators would seem to have a leg up when it comes to experience and process.
The theory is not unique to one person or organization, but real estate strategist and prop tech investor Antony Slumbers, as well as author of Rethinking Real Estate Dror Poleg have certainly become central voices in the discussion. Here’s a deeper dive into their thinking on the subject of future work.
Management agreements / revenue sharing between landlords and branded operators = future of office.
“It’s the first swell of something that’s going to become a giant wave by the end of the summer,” said @IndustriousHQ CEO Jamie Hodari.https://t.co/Y5MBtUilkl
— Dror Poleg (@drorpoleg) May 19, 2020
What we’re tuning in to:
The Real Estate Innovators Podcast
Innovation in Real Estate with Antony Slumbers
Antony Slumbers recently sat down with Ryan Cox and the Real Estate Innovators podcast for a fascinating and far reaching conversation about the future of work and real estate. Below is our synopsis of the conversation, but by all means listen to it yourself if you have the time.
The Proptech Forecast
Proptech companies that focus on sustainability will see a huge increase in value, especially technology that deals with HVAC and improving or maintaining air quality. Operationally focused proptech companies have a real opportunity during and post-COVID, especially companies that help link together human resource departments with real estate and IT. Technology companies that are focused on workplace analytics will be a very hot item, especially in the short term. Workplace analytics technology helps companies and building owners study how space is being used, by who and when.
Coworking Forecast & #SpaceAsAService
Mr. Slumbers has concerns about space as a service in the short term, as shutdowns and restricted re-openings will hamper business as well as the psychology of members and potential members.
Space as a service providers that can make it through the next eighteen months stand to reap big rewards, and as a whole Mr. Slumbers believes the market to have great long-term value. Expect to see landlords of non-flex, traditional office space begin to offer more flexible office leases to attract tenants. The income value that landlords will lose through a shorter lease will be regained by offering additional services such as meeting rooms, event space, podcast studios, video production rooms, etc.
In general, tenants may take less space, but they will pay more for it. Commercial real estate will turn from a product-based industry to a service-based industry and flexible office leasing will become the standard.
Advice to landlords for the next 90 days:
- Prove and promote that your building has good environmental conditions.
- Figure out how to get people “from street to suite” safely and efficiently.
- Communication between landlord and tenant will be crucial. Landlords should know tenants reentry plans so they can help accommodate appropriately.
Flexible Workforce Impact On Asset Location
Companies will shop out assistance when it comes to strategizing how to effectively re-design and operate their space. Secondary cities could see great growth as a result of density concerns, especially secondary cities near major metropolitan areas. Commercial real estate brokers will increase their value by helping companies use their office space productively. Mr. Slumbers says that if you want to see what brokerage is likely to resemble in the future, look at traders on Wall Street specifically what Goldman Sachs has done with their trading business. It is still a job that pays well, but there are far fewer people needed to do it.
What we’re taking note of:
If your business is still adapting to remote working, here is an excellent resource. The world’s largest all-remote company is offering an in-depth handbook to help guide businesses through the four phases of remote work adaption.
The phases of remote adaptation by Gitlab
We’re inspired by:
One of our favorite clients, Investors Bank, led by one of our favorite people in CEO Kevin Cummings, has made a special $25,000 donation to one of our favorite causes, the All Stars Project of New Jersey!
We're thrilled to share that @investorsbank one of our key @AllStarsOfNJ partners, have made a special $25,000 gift to ensure that ALL of our young people have a developmental summer. Thank you to the Investors Bank team for supporting our youth to #DevelopWhileDistancing! pic.twitter.com/OE3yx5OBBU
— All Stars Project (@AllStarsProject) May 20, 2020
What we’re looking forward to:
LIVE Member Spotlight: Boxcar
Reconnect with our coworking space, The Station, and Boxcar Transit on Thursday, May 28 for a Q&A with the company’s founder, Joe Colangelo. Small business expert Irlana Ho will highlight the key strategies Boxcar is using right now and how you can successfully pivot your own strategy.
Sign up for free on Eventbrite!
What we’re listening to:
