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How Space As A Service Is Transforming The Commercial Real Estate Industry

You’re probably familiar with the term SaaS, or software as a service. It’s a method of delivering software via an online subscription rather than being installed on an individual computer. Microsoft Office 365, QuickBooks Online, and Yardi Property Management software are three examples of SaaS. Users no longer own the physical software – they subscribe to it instead.

The concept of SaaS – or space as a service – is rapidly changing the commercial real estate industry. In the same way that businesses no longer own software, companies of all shapes and sizes are increasingly not owning, or even signing long-term leases, for the office space they occupy.

Here’s a look at how space as a service is transforming commercial real estate.

Five Tech Factors Reshaping Business And Commercial Real Estate

There are five technological factors that are fundamentally changing how businesses operate, where they operate, and the work that people do:

  • High-speed, high-band internet connectivity is nearly ubiquitous.
  • Software as a service and cloud computing is the new norm, making the actual place that work is done irrelevant.
  • The ubiquity of ultra-powerful mobile devices such as laptops, tablets, and smartphones go where the worker goes.
  • Internet of things sensors can connect almost anything to the internet.
  • Rising use of artificial intelligence and robotics.

These five factors are changing the demand for space. In their 1st Edition Your Space Report, Newmark Knight Frank noted Space as a Service as one of the main themes affecting how office space is occupied in top real estate markets around the world.

On-demand Labor Is The New Norm In Employment

While workers and business may want an office from which to work, more often than not they don’t actually need one. Part of this is due to the changing way that companies view real estate, and part is due to the changing nature of employment.

In the same way that companies subscribe to software and see real estate space as a service rather than a balance sheet line item, flexible working is also becoming the norm for many people and businesses. Research conducted by both Google and Intuit notes that over the next several years flexible working will define the workplace of the future, with upwards of 50% of the workers in large companies being flexible or freelance staff.

The Changing Nature Of Office Space Occupancy

These five tech factors and the continual shift to on-demand labor is also changing the where, when, and how of the office space occupancy footprint. It wasn’t too long ago that traditional office space was the first, last, and only choice that businesses had to make when locating.

Today, companies occupy office space in six different ways:

  • Central headquarters, or dual central offices in the case of large companies like Amazon,
  • Hub space,
  • Serviced office,
  • Coworking office space,
  • Client office space,
  • Home office space.

These methods of occupying office space aren’t mutually exclusive. It’s quite common today to see the same company using space two, three, or even all six ways depending on the firm’s demand for office space at a given point in time.

The Effects Of SaaS On The Commercial Real Estate Industry

Businesses and people viewing space as a service are influencing the commercial real estate business in several different ways:

Landlords are no longer just rent collectors, they’re also service providers

The coworking office sector is rapidly growing. Restaurants and hotels are converting under-utilized floorspace into coworking space during off-peak hours. Property owners are working with coworking office companies in joint venture partnerships.

Physical office space as a standalone product is losing appeal

Users of space expect the physical part of the office space – the four walls and a door – to be integrated with the overall space as a service experience. Part of that SaaS experience means combining digital data-driven services and technology to make the office environment smart, similar to the way that cities are becoming smart. Smart office space also helps users define their company brand and values.

Property managers will be doing more than just managing property

The traditional role of property management is also changing. Before, managers maintained the physical premises, responded to tenant maintenance requests, collected rents and enforced long-term lease provisions, and generated routine financial reports.

Under the SaaS model, property managers play a more active role. They’re still responsible for all the above tasks. But in addition, property managers are also becoming curators of the office space experience with tasks such as interior decor, day care centers, social events, and concierge services falling under the role of property management.



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