The value of the office is more than the work that gets done in the space or the people who work there. Having an exclusive office address in a well-known part of town gives a business legitimacy and clout, it’s what drives competition and rent increases at the world’s most exclusive office addresses. As a remote work-based future sets in for businesses, many are opting to lose the office and keep the address.
Virtual offices have been relatively popular for years but the industry tends to fly below the radar by design. The premise is simple: for a service fee, a business can list its address at an office, even if they don’t occupy any space in the building. The building provides staff to answer calls, collect mail to forward, and book communal conference rooms when needed. Far cheaper than paying rent, businesses with virtual offices are for companies that value every part of the office except the space itself. Australia-based Servcorp was an early pioneer of the concept. Started in 1978, Servcorp now has roughly 150 locations in 43 cities offering some of the most exclusive office addresses to more than 50,000 members. Servcorp is a heavy hitter in a rapidly growing industry. Opus Virtual Offices, Regus, Davinci Virtual Office, and Alliance Virtual Offices each have grown rapidly or expanded virtual office offerings over the past decade.
Thanks to the pandemic, the virtual office industry is growing faster than ever before. The global virtual office market is expected to grow from $27 billion in 2020 to $32.9 billion in 2021 at a compound annual growth rate of 21.9 percent. That’s not surprising given the current state of affairs. COVID-19 is teaching companies remote work is more feasible than they thought and many are considering ditching office space altogether. Some already have.
A virtual office can be the best of both worlds, giving a business a ‘home base’ to anchor operations, and space to meet when needed without the hassle or cost of the day-to-day management of a physical office. They’re an easy win for office owners too. Instead of being limited by their inventory, the space they can provide, offices with address clout can increase revenue by stacking as many virtual offices as they can, given they don’t have to actually provide any space. Some buildings have hundreds of virtual offices registered at the address, making substantial contributions to the operating income of the asset. Battered by a pandemic that’s hit every office market hard, more owners are considering monetizing their address to make ends meet.
“A local office gives you credibility because people are parochial,” Ility CEO & Co-Founder Marcus Moufarrige said. For the last 25 years, Moufarrige worked at Servcorp helping to build the companies enormous virtual office business. Today he runs Ility, a hybrid work product that combines virtual offices, workflow automation, and hybrid workspaces. He thinks that remote work tools can become a new form of revenue. “The office is not going away because people want to deal with people in their same city,” he said. “It’s a real sense of convenience and accessibility. It doesn’t matter if you’re a multinational corporation or a tiny startup, if you’re trying to close business you’re going to have a higher chance of doing that if you have the appearance of someone on the ground there.”
Virtual offices are as much about marketing as they are about operational efficiency, perhaps even more so. That’s given them a certain stigma in some people’s eyes. Virtual offices are a bit of a magic trick, appearing to be something they’re not. Depending on how you look at them, virtual offices can be seen as an attempt to deceive people; they are often used to make a business look more successful, more prestigious, or more local than they really are. It can feel a bit like renting a private jet while pretending you own it or acting like you ordered bottle service when you only got one drink. There’s something showy about it that’s slightly disconnected from the reality of the situation, despite both being sensible decisions.
“I don’t think they’re fooling anyone,” Moufarrige said. “It’s like asking if all the stuff you see on Instagram is real. It’s marketing, it’s a marketing experience. It normally shows a great deal of intent and it’s often more legitimate than not. It’s not fake, you’re trying to acquire customers. I don’t think it’s a farce in any way. It’s a great marketing tool for people that are smart.”
Whatever stigma there is around virtual offices is rapidly fading as everyone is forced to switch to remote offices. Working from home means most offices are virtual these days, some companies are just smart enough to not pay for the pace they’re not using. Overnight virtual offices transitioned from a corporate hoodwink to a sensible real estate strategy based on plummeting occupancy and usage. Virtual offices are a star for a company to orbit, a place to anchor a remote workforce. They’re not a gimmick, they’re a rapidly growing line of business landlords and office owners are starting to see as a great way to boost net operating income for properties with prime locations.
Landlords have been scratching their heads looking for the right set of services to make up for whatever office shortfall might exist. For most owners, it’s still too early to understand what, if any, loss of revenue will be long term. The country is still fighting the pandemic as new variants create resurgent threats. Most occupiers are still in a holding pattern, struggling to understand what their office space needs will look like on the other side of the pandemic. No one knows what the permanent decrease in office occupancy will look like, but it’s safe to say 100 percent of occupants will not be coming back 100 percent of the time, leaving a gap in occupancy and revenue landlords will need to fill. Offering virtual offices is a great opportunity for office owners to provide services and generate revenue from companies outside their four walls. Since the offices aren’t limited by space, the number of potential tenants is nearly unlimited, as is the earning potential.
Exclusive addresses will always be valuable, people will always want to be close to things. ‘Near me’ is one of the most popular phrases in Google searches. The change in how we use and perceive offices has created new options to monetize an address, ones that are no longer limited to what can be built at the location. The rapid adoption of remote work is changing the paradigm for virtual offices and landlords alike. Virtual offices were never a gimmick, just ahead of their time.