The toothpaste is out of the tube. Companies of every shape and size have gotten enough of a taste of the freedom that flexible workspaces provides that the transition of office space from a rigid product to a fluid service is here to stay. It’s an idea that may have started in co-working but has now become something much bigger. WeWork’s valuation is a testament to this: its proponents point to the growth in their corporate accounts to defend a seemingly outrageous price to “earnings” ratio.
There are a number of different models for co-working. The most well-known is the subleasing model that WeWork deploys, where space is leased longterm from a landlord and subleased to a short term renter. Another is the partnership model that companies like Convene and Knotel use, where landlords share the profits with flexible space providers. In both of these examples, building management companies are the ones that interface with the end user, the office tenant.
Tenant rep brokers have traditionally been the first point of contact for a company looking for an office. So most flexible space models represent an encroachment into a broker’s value proposition. But this encroachment can go both ways. Brokers could form a network strong enough to help landlords easily find replacements for short term tenants and reduce the risks for tenants that need to quickly expand or contract their office sizes.
One of the companies looking to create such a network is SquareFoot. We have been following them since they were TheSquareFoot back in 2016 when I wrote an article about their strategy to create an office space marketplace that connected searchers with brokers, rather than trying to replace them. I interviewed one of the co-founders, Jonathan Wasserstrum, and wrote:
To determine the best application for the technology they listened to the market, rather than trying to change it. “We recognized that landlords and tenants both wanted brokers involved in the transaction, so we didn’t try to fight it,” Jonathan told me. Instead of trying to minimize or circumvent the role of the agent, SquareFoot embraced the long-standing double broker transaction. “The landlords and listing agents alike are used to dealing with brokers. Something like 98 percent of all deals that get done have two agents. Those brokers provide a good lubricant to get the deal done. Clients can benefit by having a really good team to advise them.” It isn’t just brokers that they have on their side, in February they acquired PivotDesk, a marketplace for office subleases
Last week they launch a new product called FLEX that will allow them to “turn to [their] roster of prospective clients and identify the right next company to move into the vacated office.” It also has a turnkey solution that provides “furniture, IT services, office management, and more taken care of to make the office transition as painless as possible.”
I reached out to Jonathan again about this new offering. He told me, “Through more than one-thousand transactions, we kept hearing our clients say they wanted lease flexibility, so we created a product, FLEX by SquareFoot, to solve that. With FLEX, our clients can unlock flexible lease terms in any space. Your space on your terms.
Property management might have been the first vertical to move on the space-as-a-service opportunity but they are not the only ones positioned to do so. At the end of the day all tenants care about is the convenience and risk reduction of flexible space, not who delivers it. If brokers are able to find a way to move companies seamlessly between their office stock and even offer ancillary management services, it could make for just as compelling of a space service as the WeWorks of the world. SquareFoot represents a way for technology to provide the infrastructure for exactly that.