Outcomes from MIPIM PropTech: co-working and hospitality are the evolving faces of the office
The real estate industry has been rapidly evolving, and nowhere is it more evident than the world of office space. The specific needs of the office sector make it an excellent bellwether for broader trends across real estate in general. Price sensitivity for both landlords and tenant companies, responsiveness to the economy as a whole, and an overarching emphasis on productivity make the field the perfect microcosm for real estate observation.
One of the biggest changes affecting the office market is the rise of flexible workspace and its subcategory of co-working. While the idea of being able to have an office in a more “a la carte” or on-demand setting is nothing new, going back to the offerings of Regus in the early 90s, recent years have seen the field take off to new heights, with industry leader WeWork counted amongst the latest startup unicorns ahead of its expected IPO later this year. Co-working has taken off for a number of reasons.
Space users find the model beneficial since it is inherently flexible, able to serve small groups or larger teams. The serviced model keeps maintenance costs low, and individual wellness is often prioritized through tenant-friendly design and on-site perks and amenities. Finally, the work-focused community delivered by co-working spaces is often much more pleasant than the transitory nature of the coffee shop crowd.
Insights from MIPIM PropTech
But while there is plenty of room for big-picture discussions of co-working, at a more tactical level, the growth of the field provides a wide variety of opportunities for creative property owners. Some of these opportunities were discussed at MIPIM PropTech Europe’s recent session “Unconference: Co-working, technology enabled and social enabler”, co-chaired by Spaceflow’s Marketing Manager Petr Boruta.
First, of course, is the simple demand for yet more co-working space. With 11 percent of all employees now working out of co-working spaces, twice as many organizations using co-working compared to two years ago, an average growth rate of 23 percent annually for the last seven years, and average EMEA take-up of 8 percent in 2018 according to Colliers, the market has plenty of opportunity for new competitors. Existing landlords are in a particularly fortuitous position to dabble in co-working, since vacant space can easily be converted into co-working centers.
But there’s another element to co-working that makes it so attractive. It isn’t just the business model of easily-accessed, drop-in space that makes co-working facilities successful. It is also their emphasis on user experience. Long gone are the days of providing a cubicle box and a simple break room. Of course plenty of these offices still exist, but only because they were formerly so ubiquitous; they’re become obsolete in modern competitive environments like major city CBDs. Modern offices necessarily must offer more to keep their tenants engaged (and renewing).
"In a recent survey, 49 percent of respondents indicated that having a great office environment is important to their happiness at work, but only 25 percent said they actually have it."
Successful co-working facilities like those run by WeWork or Industrious check off all the boxes of design and amenitization to make workers want to come in at the start of the day, instead of dreading the daily grind. It’s a paradigm shift for office real estate, adding many of the elements typically found in a hospitality setting (curating the guest experience, prioritizing aesthetically-pleasing design, adding above-and-beyond amenities, etc) to the mix.
What’s more, existing offices often simply lack the amenities that workers want. A recent study by Capital One asked office workers whether their buildings offered a number of specific features. The results told a story of missed opportunities and building shortcomings: In particular, 82 percent of respondents indicated their offices lacked facilities for nursing mothers, 77 percent responded that their buildings lacked environmental programs, 72 percent mentioned missing quiet spaces for reflection, and 71 percent noted their lack of health and wellness options.
"When you look at data on why people are interested in coworking, you see top 3 reasons are: flexibility (=cut costs & maintenance), productivity and wellbeing (that translates to the fact that each space is designed for a specific activity and the undisputable power of amenities), a sense of community."
By contrast, when asked for their single most important onsite benefit, 39 percent of respondents mentioned healthy food and drink options, 32 percent indicated social or relaxation areas, and 29 percent pointed to quiet, reflective spaces. Most tellingly, 83 percent of UK adults surveyed indicated that their workplaces are unpleasant. Addressing these misses is one part of how co-working providers were able to so quickly gain so much market traction, by pulling amenities and perspectives directly from the world of hotels and resorts. It’s also an opportunity for traditional landlords.
Even if jumping into co-working isn’t in the game plan, every space owner has the chance to capitalize on the methods and perks that co-working spaces have demonstrated work so well. The future of real estate is all about mixed uses, whether through developments that combine different property types or holistic perspectives integrating multiple use cases into spaces that fall into a typical category, like the office.
London’s under-construction 22 Bishopsgate skyscraper is a perfect example, dedicating over 10 percent of its overall square footage to providing amenities like a library, climbing wall, and dedicated event space.
Such a diverse amenity mix might seem more expected at a major resort or conference center. Tenant companies have a reason to focus on delivering those sort of class-A amenities due to the low unemployment on both sides of the Atlantic. That trickles up to landlords, who must fulfill the user need or fail.
Cater your tenants like hospitality does
In another lesson from the consumer-centered hospitality world, the need to understand the customer – the individual end user of a property – is increasingly important. Simply adding amenities that seem to fit in an underutilized suite or integrating tenant programming that sounds fun is far from the right way to get ahead.
Instead, owners should leverage the wealth of data already out there and do some research of their own. What exactly do their tenants want? What makes the most sense to provide building-wide, thus maximizing dollar for dollar tenant benefit? While broad strokes are easy to glean from existing research reports, the specific answers will likely prove nuanced based on tenant mix, location, and building positioning.
As real estate becomes more and more about user experience, ensuring that tenant needs are properly monitored becomes ever more important. The future building is truly mixed-use, open to everyone and all about the experience.
The next step of office real estate breaks down borders between asset types, allowing work and leisure to happen anywhere. Helping tenants have the best experience isn’t just about day-to-day concerns like temperature or maintenance anymore. In today’s amenity-first, highly-integrated, mixed-use office environment, keeping your finger on the pulse of tenant preferences could mean the difference between a long-term lease and a tenant that jumps ship at the first opportunity.
Words by Logan Nagel, Petr Boruta
Unconference at MIPIM PropTech was kindly hosted by Socialworkplaces. If you want to know more insights from it, continue here.
If you want to learn more about tenant experience, read the articles