The inevitability of #SpaceasaService

Joseph Mallord William Turner Norham Castle, Sunrise c.1845 - Tate Britain, London

If you are in a hole, stop digging. 

And get yourself a plan.

The real estate market, offices in particular, are most certainly in a hole.

Across the world, especially in major Western cities, but truth be told pretty much everywhere globally, we are seeing low office occupancy and utilisation. Post Covid, many employees have become used to, and effective at, working from home. 

And are generally happy to save on commuting costs. 

They do need, and want, an office to socialise with colleagues, collaborate, meet customers, mentor and be mentored, receive training, and as a place conducive to individual focussed work. But, they don’t want or need to do this, mostly, more than 1-3 days a week. Plus they do not perceive the format and services of their current offices as providing what they need to do this effectively. 

From corporate occupiers point of view, according to a new report from the ULI & Instant Offices, ‘only 14 percent of occupiers believe their existing workspace portfolios align completely with their business objectives and strategies’.

So we have demand but different and less than pre Covid times.

On the supply side landlords and investors are facing problems: share prices are down, construction cost inflation is high, interest rates are much higher than the average of the last ten years, liquidity is weak and investors are pushing for bargains.

In addition they have limited understanding of what customers really want going forward and a shortage of talent with strong service and empathetic skills.

Finally banks, investors and purchasers are not yet taking employee well-being, satisfaction, or workplace productivity into account. 

So we have a mismatch between what customers want out of an office, the skills and costs needed to supply it, and a financial market that is both tight and lacking in understanding of the new realities of demand.

With all this in mind I’ve been thinking about what strategies should be adopted by real estate companies. 

Here are some suggestions as to what should be prioritised given that money is tight, and expensive.

1. Adopt a customer-centric mindset: Understanding customer needs and preferences should be the top priority. Regular engagement, surveys, and feedback collection can be done with minimal costs and help shape future strategies.

2. Enhance customer experience: Focus on low-cost enhancements that can have a significant impact on customer satisfaction. For example, improving building maintenance, offering responsive customer service, and organising community events.

3. Establish partnerships with coworking providers, HR firms, training organisations, or local businesses that can help offer additional services to customers without incurring significant costs. Not least of all, help customers make hybrid working work.

4. Prioritise low-cost retrofits that can have a significant impact on customer satisfaction. This may include repurposing under-utilised spaces into shared amenities or improving lighting and ventilation systems for better energy efficiency and comfort.

5. Focus on cost-effective technology solutions that can improve building operations and customer experience. This may include adopting more affordable IoT sensors, energy management systems, or software tools to enhance communication with customers.

6. Implement sustainable practices that don't require significant capital investment. Examples include adopting green cleaning practices, encouraging waste reduction, and promoting energy-saving behaviours among customers.

7. Diversify portfolios: While this strategy may require more capital, selectively diversifying the portfolio with lower-cost assets, such as smaller office spaces or properties in emerging locations, could help mitigate risks and provide more stable cash flow. As we know, you make your money in real estate when you buy, not when you sell. Bad times are good times to buy.

8. Attract and retain talent: although it might not seem like a cost-effective strategy, investing in the right talent can yield long-term benefits. Focus on offering competitive salaries, fostering a positive work culture, and providing professional development opportunities to attract and retain the right people. Smart people want to work with companies embracing the future, not protecting the past. Be the future.

9. Finally, play a long game of educating stakeholders on the changing dynamics of the office market and the importance of employee well-being and productivity. The wider market is still thinking and investing based on principles that were solid pre-Covid but no longer are. There is a storytelling game to be played: innovative, forward thinking and customer centric real estate companies have to persuade the market that they are where future returns will be found. Attitudes need to be reset.

Essentially everything above points towards the inevitability of a #SpaceasaServicefuture. Where customer experience is what matters, and if you don’t understand that you have a problem. Because, as I’ve repeated incessantly, the real estate industry isn’t about real estate anymore. It’s about enabling people to be as happy, healthy and productive as they can be. Everyone needs a workplace, in the sense of somewhere to work. But that can now take many forms, and be in many locations. No-one needs an office anymore. They need to be made to want an office. And this applies regardless of how the space is being procured: 1 day or ten years makes no difference. Unless the space provides the services the customer needs it has no point, no future, and no value.

#SpaceasaService will no longer be a niche, it’ll be the the norm.