Space-as-a-Service Emerges as the Hot New Business Model in Commercial Real Estate

The commercial real estate industry is at an inflection point as a number of parallel trends are shaping transformation in the industry.

First, the industry is moving from products to services, and ownership to access. Examples of this in other industries include buying cloud services instead of building out a data center; listening to streaming music instead of purchasing CDs; or renting a dress for a black tie wedding rather than purchasing one.

Second, the way we work is changing. Work is now thought of as “what we do” rather than “where we go”. There is an increasing number of people now working freelance and according to projections found in the Freelancing in America Survey, if freelancing continues to grow at its current rate, the majority of U.S. workers will be freelancing by 2027.

Third, leases have been getting shorter over the past 20 years. Many firms today want to be able to scale up or down quickly and that means leasing a portion of their space for only a few years or even a few months. Newer real-estate companies like Regus, Convene and WeWork offer short-term leases and smaller, amenity-rich office spaces for corporate tenants that want flexibility. These new offerings make traditional leases of 10 or 15 years less attractive.

What is Space-as-a-Service?

Space-as-a-service is a complete shift in mindset. For example, tenants are now referred to as clients and space is viewed as a service, not an asset.

According to Propmodo, space-as-a-service has two meanings. First, it refers to space that is procured on-demand, whether by the hour, day, week, month or year. Procuring real estate space on demand is already happening. Big name corporations such as Microsoft, Salesforce, Samsung, Spotify, Starbucks, Pinterest and Facebook already lease short term space from companies like WeWork. Real-estate consultancy JLL, predicts “up to 30 percent of corporate real estate portfolios will include flexible space by 2030.” 

Second, space-as-a-service refers to a workplace (however procured) that provides the spaces and services appropriate for the “job to be done” of every individual, as they need it, when they need it. And, this ‘job to be done’ is changing because of technology advancements and automation. If we consider that automation will change the jobs we have from repeatable, predictable tasks (that many of us spend large portions of the day doing) to jobs that are focused on human skills such as innovation, creativity, judgement and collaboration, workspaces will need to reflect that change. Human skill jobs require quiet work, collaborative work, learning and thinking—and the ‘one size fits all’ row of desks does not support these jobs adequately. Providing space and services appropriate for the “job to be done” is where property owners are able to maximize revenue from the space. In addition, selling clients add-on services that enhance their experience in the workplace such as reception facilities, IT services and support, executive assistance, and event management, can create new revenue streams beyond rental income for property owners.

An emerging hybrid model that is rapidly becoming popular combines leased private space with flexible, on-demand shared space such as meeting rooms, drop-in workspace, or amenities such as cafes and workout facilities. This hybrid approach enables organizations to scale their footprint and increase/decrease add-on services to match their needs.

What Technology Supports Space-as-a-Service?

The ability to create flexible space, the foundation of a space-as-a-service offering, is now possible due to advancements in technology including:

• Connectivity – Most work historically done ‘at the office’ is now conducted online, reducing the number of workers physically located at a traditional corporate office location. For this modern workforce to fully function however, they have several non-negotiable requirements -- fast, reliable connectivity and the latest applications software at their fingertips. Workers need constant access to the cloud. Consequently, building owners offering space-as-a service must ensure connectivity is top-notch to support today’s collaborative, online teams. 
• Smart Lighting Infrastructure – We are living in an age of digital transformation where data is collected, shared and used in new ways across different networks and applications. An existing data network infrastructure can become the foundation that delivers new insights and business intelligence that enables new applications.

Data Driven Decisions

Today, there are many new applications that leverage data from existing network infrastructures. One example is Uber, the popular rideshare application. Uber leverages the cellular network, Google Maps, GPS, and existing drivers with cars that have available seats. These existing infrastructures support their wildly popular mobile apps (one for riders and another for drivers). Getting people from point A to point B by connecting riders to nearby drivers relies on data-driven decisions at every level. Data is collected, analyzed and used to predict where drivers should place themselves in order to get the best-paying fares, how long a customer’s wait time will be, and what price will be charged for the ride at a given point in time. Not only is it convenient for riders, but it has created a network of independent contractors that generate income as Uber drivers. Leveraging existing infrastructure is critical to the company’s success.

A smart lighting system is an existing data network infrastructure that enables smart building IoT applications, such as space optimization, to transform commercial building spaces into smart, flexible workspaces. A lighting system with integrated sensors and input devices creates a digital ceiling that can provide data about the space, at a granular level, to smart building applications. Cloud-based Software as a Service (SaaS) applications, such as Rifiniti Optimo, leverage this data and provide insight as to how a space is utilized and where it could be better optimized. In turn, leveraging this type of application enables commercial real estate leaders to make smarter, faster real estate portfolio decisions that reduce costs while improving occupant comfort and productivity levels. For example, Rifiniti Optimo solutions can help create an efficient restacking plan, execute space consolidation, reconfigure conference rooms or design collaborative workspace that engages employees.

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