It’s paradise out there for a commercial real estate developer or property manager in 2019.
Vacancy rates are low, credit is both cheap and readily available and property value has been steadily growing for years. Under the surface however, there’s a lurking feeling that both the market and industry may be at an inflection point.
Do you remember the times when to have a personal computer you had to buy components and build it? Or when you needed server space and had to build a server room? In 1980s communist Poland, the easiest way to get a sweater was to knit a sweater. But then Apple came, Amazon launched AWS and…Poland became capitalistic. In other words, markets provided options for a complete product, not just one that still needed assembly. It sometimes feels like this is what’s happening now in the world of commercial real estate.
For a century or more, to have a modern office space you needed to buy or rent an office building, hire architects, project managers and a construction company. To manage that you needed a real estate department, and later to run the space facility management team. WeWork is trying to convince the world that now it’s not needed: they provide workspace as a service and it’s as easy to use as Amazon Web Services. This is part of a much larger movement in the business world,, the management gurus for decades have been preaching: if it’s not your speciality, outsource it. Real estate developers like British Land or Land Securities follow suit providing their own flexible space offering.
Not every company will, however, buy into the WeWork model. Companies want to own their brand and values expressed in space design, they want the office to be theirs. Still they’ll need to deliver a compelling and competitive employee experience—comparable to WeWork’s.
This will leave a gap that smart landlords will aim to fill. They’ll provide a building that supports a tenant. Seamless access control system, ability to order food, book classes, report issues. In 21st century smartphones should be remote control to the surrounding reality. Tenant experience apps are a promise of exactly that in our working environment.
A good building operating system will allow a landlord to enable extra ease of building usage. It’ll put them in direct contact with their tenants (through push notifications, issue reporting, messaging, and publishing news directly to their phones), and it’ll help them understand tenant’s needs. And understand their needs, they must.
War for data
We intuitively understand that data is power. It’s nothing new. Google, Facebook, Amazon, Netflix thrive thanks to amazing analytics. Supermarkets were a boring commodity, until a bar code and later loyalty cards were invented. Ownership of data shifts power. Without it decisions are poor, and companies tread in the dark. A landlord who doesn’t know its tenants’ preferences, satisfaction, behaviours can predict and cannot prepare. A landlord or a real estate developer without data and tenant experience technology risks becoming a not-so-profitable commodity. A purveyor of concrete boxes.