01-01 02-02 02-02 02-02

REAL ESTATE

Issues and trends

An 8-year-old company worth $20 billion is after your commissions

The Ground Is Shifting Beneath You

The facts are clear. The trends are clear. The real estate terrain is changing rapidly. The old ways of doing things will not hold. The imperative for commercial real estate firms to change the way they do business has never been greater.

  • PricewaterhouseCoopers (PwC) has modernized most of its U.S. offices, adding more common space and making each office smaller, reducing the space per employee by 30%. A spokesperson for the company was quoted as saying “People don’t go into our offices the way they used to. We’ve shifted down.”
  • IBM leased an entire 70,000 square foot WeWork location (more about WeWork below) to serve 600 employees.
  • Microsoft bought 300 WeWork memberships for its New York based sales force, affording them the ability to work at any WeWork location globally.
  • The average amount of space per office worker in North America currently averages 150-175 square feet, down as much as one third from 225 square feet in 2010. And real estate experts predict this trend will continue. Open office space designs suggest that number could easily drop to 125 square feet … or less.
  • Professional service and client-oriented companies are de-emphasizing fixed work spaces in favor of decentralization, reducing demand for traditional leased office space.
  • Over 60% of millennials and 50% of Gen Xers would be as comfortable working from a mobile device, such as a phone, tablet or laptop, as they would be working from a desktop computer, and nearly half of boomers are also as comfortable working from a mobile device as they would from a desktop.
  • Over half of millennials would be comfortable sharing their workspace with someone else, and almost half of Gen Xers and boomers would as well.
  • More people are working independently than ever before. A recent survey found that over half of the US workforce will be freelancing in 10 years if current trends continue.
  • And this growing cohort of freelancers are increasingly working from home … or Starbucks … or even the beach … wherever they can take a laptop and a phone. The concept of “going to work” has been turned upside down. Ubiquitous tablets and handheld mobile devices allow “office” work to be performed anywhere. No longer do workers need to be bound to a desk to do their jobs.
  • At the same time, these non-traditional workers need places they can go at times to interact, collaborate with others and build community, but with a degree of flexibility not afforded by traditional offices. They also recognize the benefits of being around other firms and their talent and business offerings, things that traditional office environments don’t offer.

We’ve worked with over 30 brokers in the past
year to help them move deals across the goal line.

Real estate brokers understand that by bringing us in on the front end, they differentiate against a crowded field of competitors. This helps them close deals!

And by bringing us in on projects after the deal is done we provide value-add that helps build client relationships!

  • Professional service and client-oriented companies are de-emphasizing fixed work spaces in favor of decentralization, reducing demand for traditional leased office space.
  • Over 60% of millennials and 50% of Gen Xers would be as comfortable working from a mobile device, such as a phone, tablet or laptop, as they would be working from a desktop computer, and nearly half of boomers are also as comfortable working from a mobile device as they would from a desktop.
  • Over half of millennials would be comfortable sharing their workspace with someone else, and almost half of Gen Xers and boomers would as well.
  • More people are working independently than ever before. A recent survey found that over half of the US workforce will be freelancing in 10 years if current trends continue.
  • And this growing cohort of freelancers are increasingly working from home … or Starbucks … or even the beach … wherever they can take a laptop and a phone. The concept of “going to work” has been turned upside down. Ubiquitous tablets and handheld mobile devices allow “office” work to be performed anywhere. No longer do workers need to be bound to a desk to do their jobs.
  • At the same time, these non-traditional workers need places they can go at times to interact, collaborate with others and build community, but with a degree of flexibility not afforded by traditional offices. They also recognize the benefits of being around other firms and their talent and business offerings, things that traditional office environments don’t offer.

What to expect

Disruption is Staring You In The Face … Ignore It At Your Peril

The coworking / office sharing phenomenon is turning the traditional commercial real estate model on its head. The successful real estate professionals of the future will be those who effectively respond to this change. Will you be disrupted? Or will you find your opportunity in the space to be a disruptor?

  • Coworking outfits like Regus have been around for decades, butWeWorkis now disrupting the office space market in ways that would have been considered unimaginable a mere eight years ago.
  • Since its founding in 2010, WeWork has grown into a business valued at $20 billion, with tens of millions of square feet of office space in 23 US cities and 21 countriesaround the world, and a growing community exceeding 175,000 members.
  • In March 2018, SEC filings indicated that WeWork had raised over $400 million to start a fund to purchase properties directly.
  • Between August 2016 and July 2017, only Amazon leased more office space than WeWork in the US.
  • In the words of Commercial Observer, WeWork is “changing the complexion of major office markets and epitomizing how the modern workplace must evolve to serve today’s workforce.”
  • The advantages to tenants are compelling. Unlike traditional office space leases of 5 or 10 years in term, coworking occupancy obligations can be as short as 1 month and may allow for rapid growth or retraction of seats and offices. And there is no investment by tenants in such things as furniture, space build-out, and technology, as well as common amenities and shared services.
  • If you think this disruption applies only to small and medium-sized spaces, think again. WeWork is shifting its focus to larger companies. Through its recently launched “Enterprise” division, it is now offering full-floor spaces and even entire locations to single tenants, while also outsourcing its services to construct, design and manage existing office spaces occupied by clients.
  • And it’s not just office space that could be threatened. What would happen if WeWork (or a competitor) leased or built 1 million square feet of industrial space and then acted as a landlord?

If you’re only talking to people in your industry
you’ll die there.

Astute business leaders, entrepreneurs and, yes, real estate brokers know the importance of getting out of the echo chambers they live in  very day. Outside perspectives, spanning three decades across many industries, are critical to success. Learn from others to ensure your own success.

 

  • And WeWork hasn’t stopped there. They have incorporated a suite of value-add offerings to their clients, including health insurance, fitness/wellness centers, an internal social network, social events, workshops, an annual summer retreat and a private school.
  • Deborah Boyer, EVP for the SWIG Company, which owns almost 9 million square feet of real estate, said: “When you look at the growth of, for example, the coworking companies, it’s clear that long-term leases with little flexibility are probably not entirely the way of the future.”
  • And it’s not just WeWork. The market is becoming crowded with “mini-disruptors”, companies such as LiquidSpace, PivotDesk, and ShareDesk. And if Amazon, the master of bundlers, gets into the game all bets are off.

 

  • Retail? What’s going to happen when a hedge fund decides to buy existing malls and reconfigure with live/work spaces or eliminate the traditional way of using brokers?
  • Healthcare? If you’re in the medical office market and think there’s no way it can be disrupted, think again. You may be safe until a millennial develops technology that pairs doctors ready to start or relocate their practice directly with landlords.
  • And if you think Multi-family Residential is safe … think again. In 2016, WeWork launchedWeLive, a “co-living” venture that applies the same sharing concept to housing, offering apartments that are grouped together with a number of shared spaces and services, such as cooking, cleaning, and laundry, as well as group activities and events.
  • The commercial real estate market is in the midst of a seismic change and will never be the same again.
  • The challenges to traditional commercial real estate firms have never been greater.
  • Those firms that enjoy the security of rich lease tails and annuity streams will wake up one day and wonder what happened. You blink … you lose.
  • And it won’t stop there. The disruption will spread to the residential real estate space as well.

What to expect

Disruption is Staring You In The Face … Ignore It At Your Peril

The coworking / office sharing phenomenon is turning the traditional commercial real estate model on its head. The successful real estate professionals of the future will be those who effectively respond to this change. Will you be disrupted? Or will you find your opportunity in the space to be a disruptor?

  • Coworking outfits like Regus have been around for decades, butWeWorkis now disrupting the office space market in ways that would have been considered unimaginable a mere eight years ago.
  • Since its founding in 2010, WeWork has grown into a business valued at $20 billion, with tens of millions of square feet of office space in 23 US cities and 21 countriesaround the world, and a growing community exceeding 175,000 members.
  • In March 2018, SEC filings indicated that WeWork had raised over $400 million to start a fund to purchase properties directly.
  • Between August 2016 and July 2017, only Amazon leased more office space than WeWork in the US.
  • In the words of Commercial Observer, WeWork is “changing the complexion of major office markets and epitomizing how the modern workplace must evolve to serve today’s workforce.”
  • The advantages to tenants are compelling. Unlike traditional office space leases of 5 or 10 years in term, coworking occupancy obligations can be as short as 1 month and may allow for rapid growth or retraction of seats and offices. And there is no investment by tenants in such things as furniture, space build-out, and technology, as well as common amenities and shared services.
  • If you think this disruption applies only to small and medium-sized spaces, think again. WeWork is shifting its focus to larger companies. Through its recently launched “Enterprise” division, it is now offering full-floor spaces and even entire locations to single tenants, while also outsourcing its services to construct, design and manage existing office spaces occupied by clients.
  • And it’s not just office space that could be threatened. What would happen if WeWork (or a competitor) leased or built 1 million square feet of industrial space and then acted as a landlord?

If you’re only talking to people in your industry
you’ll die there.

Astute business leaders, entrepreneurs and, yes, real estate brokers know the importance of getting out of the echo chambers they live in  very day. Outside perspectives, spanning three decades across many industries, are critical to success. Learn from others to ensure your own success.

 

  • And WeWork hasn’t stopped there. They have incorporated a suite of value-add offerings to their clients, including health insurance, fitness/wellness centers, an internal social network, social events, workshops, an annual summer retreat and a private school.
  • Deborah Boyer, EVP for the SWIG Company, which owns almost 9 million square feet of real estate, said: “When you look at the growth of, for example, the coworking companies, it’s clear that long-term leases with little flexibility are probably not entirely the way of the future.”
  • And it’s not just WeWork. The market is becoming crowded with “mini-disruptors”, companies such as LiquidSpace, PivotDesk, and ShareDesk. And if Amazon, the master of bundlers, gets into the game all bets are off
  • Retail? What’s going to happen when a hedge fund decides to buy existing malls and reconfigure with live/work spaces or eliminate the traditional way of using brokers?
  • Healthcare? If you’re in the medical office market and think there’s no way it can be disrupted, think again. You may be safe until a millennial develops technology that pairs doctors ready to start or relocate their practice directly with landlords.
  • And if you think Multi-family Residential is safe … think again. In 2016, WeWork launchedWeLive, a “co-living” venture that applies the same sharing concept to housing, offering apartments that are grouped together with a number of shared spaces and services, such as cooking, cleaning, and laundry, as well as group activities and events.
  • The commercial real estate market is in the midst of a seismic change and will never be the same again.
  • The challenges to traditional commercial real estate firms have never been greater.
  • Those firms that enjoy the security of rich lease tails and annuity streams will wake up one day and wonder what happened. You blink … you lose.
  • And it won’t stop there. The disruption will spread to the residential real estate space as well.

Will you wake up one day only to realize you have been disrupted? Or will you be one of the disruptors?

The choice is yours … but time is running out. You can get ahead of the curve, but only by responding quickly and intelligently.

With our combined business strategy expertise and thirty years of commercial real estate experience, we can help you figure out how best to navigate treacherous waters to ensure your success going forward.

We are unique in that we aren’t immersed in the industry day-to-day. So we can provide a fresh, outside perspective, gleaning insights across many industries and leveraging our understanding of disruption, to help you put the right strategy in place.

Contact us for a free, no-obligation conversation. We’d love to share our insights with you.

Type of Inquiry

Mike Cobb

Mike has provided strategic, operational and financial leadership to small and medium-sized firms, as well as Fortune 500 companies and large government organizations, in a broad range of industries.

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