Office is changing
What if you could spin up an office space whenever you needed it, wherever you needed it?
What if, no matter your size, you could have office space anywhere in the world.
It was Marc Andreessen, who wrote the famous piece “Software is Eating the World.” He was right. This software takeover drives more than how we consume digital products. It drives how we expect every kind of product to work.
Software is a part of almost everything we use today: phones, computers, cars, crockpots, shopping, everything. Software is driving our expectations of nearly every product experience. Can you imagine today if someone handed you a set of 10 CDs that you had to use to install Facebook on one computer, and you could only use it on that computer? And you had to pay $99 to own it? Crazy talk. But that’s how it used to be.
Today, we expect membership fees for products that are continually updating. This is how we get our content now from Netflix. This how we shop with Amazon Prime. This how transportation works with Uber and how food works now with Blue Apron or Door Dash.
Today, products as a service are eating the world.
We’ve already seen AirBNB bring this model to the real estate world. But perhaps the most exciting change is coming to commercial real estate, which is the largest alternative investment asset in the world.
Coworking is outdated
Coworking was built from necessity, as many innovations are. Driven by a technology mindset, it was initially a way to repurpose old buildings into usable space. The idea has exploded. But coworking today is not what it was ten years ago. The very word coworking doesn’t describe what companies like WeWork or Knotel are building now.
Coworking is an outdated term. What we have now is the idea of Space as a Service or SPaaS.
There was a time when a company existed in one place. They invested in that physical location, and it made sense to do so. Setting up an office is a significant capital expenditure. You have to buy furniture and other furnishings. You commit to space of a certain size for a long time and build in a way that fits your company. Historically, commercial real estate has required companies to commit to a plan for the next 5, 8, or 10 years.
Today, how are companies supposed to know what they will be in ten years.
Things change quickly. Remote work is the new normal, and teams span across the globe. The very idea of full-time employment is shifting to fractional workers and contractors. For many companies today, it doesn’t make sense to invest heavily in one location. They may outgrow it in a few years or require locations in new areas.
So, what if real estate worked like software? What if office space worked the way we expect our other products to work? As a service.
Coworking is not about tossing desks in a room and making it cheap. It’s not about providing flexible workspace on flexible terms. It’s about companies spinning up an office like they spin up a remote server on AWS. The office now is about companies adding desks as quickly as they add a seat to Dropbox or Slack.
Why can’t office space mirror the way we engage with the other products in our business workflow?
What do you expect?
You expect to order a product from Amazon and have it the next day. You expect to add a seat to your software whenever needed. You expect to drop into any city and grab an AirBNB or a Hotel Tonight room. Why can’t we expect to drop into any city and add a desk or two?
This is Space as a Service: dynamic and flexible workspace-on-demand.
The traditional office space isn’t going to disappear any more than hotels disappeared when AirBNB came along. There is still a need for traditional office leases.
But consider the size of the commercial real estate market. It’s worth trillions of dollars worldwide. There could be multiple billion-dollar unicorns in the SPaaS model, and that would only be a fraction of the market. This is a massive industry that is ripe for disruption as the workforce and cultural expectations change.
Ten years ago, coworking hardly existed. Over the next decade, SPaaS will be the next iteration that explodes onto the scene. Companies of all sizes, from individual consultants to fortune 100 organizations, will be engaging the SPaaS model to keep their capital costs down and increase their flexibility.