The ability to embrace innovation, beyond technology alone, makes or breaks businesses. The corporations that spare active mindshare to future-proof their businesses have been and will be rewarded. The world of real estate is no exception.
We have witnessed an increasingly positive attitude from real estate investors and operators towards innovation. Yet, the dynamics in segments like coworking, real estate’s delayed take on the sharing economy, are proof of the overall timidity of the industry.
As the leader of the pack, WeWork has drawn a lot of attention these past few weeks with its much talked about IPO controversies. Does WeWork deserve a tech valuation? Or is it ‘just’ a real estate company? The discussion among its detractors is a heated one I won’t discuss here. But the question of a tech vs. real estate company valuation needs to be addressed for investors – along with how the company plans to turn a profit within a reasonable time frame, to avoid unhealthy manipulations from an investment perspective.
Now, from a business and user perspective, is there anything wrong about the fact that coworking operators created a real estate-based business and found ways to use technology, amongst other tools, to enhance the customer experience with a user-focused approach?
Whether you are a coworking believer or not, it is hard to deny the fact that WeWork, the global mammoth in the business of coworking, or other players such as The Desk, The Hive or Spaces in Asia-Pacific, have contributed to drive a much needed paradigm shift in the world of real estate. Here are three driving principles of coworking that I believe have benefited the world of commercial real estate.
Users first, not tenants
Founded on user-centricity over tenant-centricity, coworking operators understood from day one what is missing in commercial real estate. By putting individuals before corporations, some entrepreneurs, with no real estate background for most, identified a market gap, and captured a need that seem to have always existed. While many real estate players talk about user centricity, reality says otherwise. Take the overused word “Occupier” for instance. It is probably one of the ugliest words to be found in real estate and it is symptomatic of how far down in the priority chain users are.
Imagine for a moment if we called them Guests instead? Imagine if we built meaningful relationships with them rather than seeing them as byproducts of a transactional relationship with the all-mighty tenants? Imagine if we engaged with them directly as hosts and let them inspire the customer experience we create and manage? Now imagine the value of such a strong group of users coming together and the premium it would add to the asset value in the scenario of a disposition.
Then maybe the lines between OPEX and CAPEX models could be refreshingly blurred for the enjoyment of the guests and the satisfaction of the owners.
Content over hardware
Coworking operators thrive in building their identity around the communities they attract and service. They created roles such as “community managers”, whose only job is to breathe life into the community by connecting, inspiring, informing them. By mastering the art of space programming, they manage their piece of real estate as a destination brought to life through ongoing, relevant engagement. Not as a simple space between 4 walls and a ceiling. They have the courage to let go – and let the spaces take a life of their own, letting the identity of the communities they hosts influence their own identity.
Some visionary owners we are lucky to work with, have managed to break the rule that forces owners to maximise leasing revenue of each square foot. Instead, they integrate an “activation philosophy” into their spaces’ design. From spaces to places, they eventually outperform the competition, both financially and in the heart of consumers. New World’s K11, designed by our talented friends at Kokai Studio, is a beautiful example of that.
Technology to enhance, not to disrupt
Debates taking place in high-profile real estate forums often touch upon the type of innovations that will disrupt real estate. Cloud, artificial intelligence, augmented reality and data analytics usually make the top of the list.
Technology is too often linked to disruption, giving away the underlying fear that technology triggers in the inner circles of real estate, and the level of unpreparedness of key players. Maybe it’s precisely because technology is itself the subject, as opposed to putting the focus on the applications enabled by technology, that limits the discussion within a such a narrow framework.
By taking a benefit-based perspective, rather a feature-based perspective, some coworking operators have made a better use of data to deliver personalisation, real time asset management, guest recognition and location-based guest engagement solutions. We hope we’re only a few years from the time global real estate players too, will consider data a valuable asset class.
Coworking players still have to deal with their own challenges, including late comers who have all plowed in the route of so-called ‘cool industrial’ type of spaces, creating a world of sameness in the process. Yet, coworking players are moving fast, tapping into unmet user needs, and enabling spaces through technology and content in ways that pushes commercial real estate players to rethink their approach.
The same way that the hospitality players took time to accept Airbnb as one more hospitality player, and started to shape their offering to either complement or compete with it, we may be still a few years away from seeing commercial real estate players that accept coworking as their own. But we hope the opportunity to learn from this maturing sector will not be lost.