According to recent research from deskmag, shared workspaces accommodate the collaborative and interactive nature of the modern mobilized workstyle. Following this trend, workspace providers have begun to embrace technologies to achieve workspace optimisation, maximise user experience and enhance business efficiency. This article will discuss this emerging sharing economy phenomenon in the corporate real estate (CRE) industry.
The Drive for Urban Sustainability
According to the OECD Environmental Outlook to 2050, around 70% of the global population will live in urban environments by 2050. They are the main driver of economic growth, responsible for 80% of GDP. However, the urban population consumes around 79% of global energy and emits around 60% of the world’s greenhouse gases. In recent years, policy-makers have become increasingly alert to this and the issue of urban sustainability has urgently risen up the agenda.
“In the context of the corporate real estate industry, the demand for offices is increasing while land resources are limited.”
The European Union’s 2020 strategy clearly commits to smart, sustainable and inclusive growth, all of which is relevant to social innovation through the Innovation Union initiatives. In the context of the corporate real estate industry, the demand for offices is increasing while land resources are limited.
Over the last decade, the upsurge in digital platforms has encouraged the peer-to-peer sharing of resources, which has had a positive influence on urban sustainability. It has enhanced source utilisation, improved operational efficiency and reduced waste.
In addition, the rise of collaboration hubs has encouraged interaction between people, businesses and innovators, particularly in the technology sector, which has boosted civic vitality and economic growth.
Naturally, in the evolving social demographic environment, people’s work behaviours and expectations do differ. Generation Y and Z are going to make up more than 75% of the total workforce by 2050. Their style of working, therefore, represents the future of work and also indicates what future market demand will look like in the Corporate Real Estate (CRE) industry.
Shared Workspaces are Working for the Sharing Economy
People have always shared materials within groups. This involves the selling, swapping and gifting of goods and services. The main motivation behind the social practice of ‘sharing’ was, historically, material scarcity and low production capability.
Essentially, individuals choose to share because they cannot afford the price of the consumption or the cost of production. Therefore, with the increase in production capacity that occurred around the 1980s, ‘sharing’ among people began to decline in wealthier communities.
“The driving force behind this resurgence in sharing is the renewed belief in community, peer-to-peer networks and real-time technologies, growing environmental awareness and the impacts of the global recession.”
In recent years, as part of the fourth industrial revolution, ‘sharing’ has begun to evolve again. This emerging technology trend has created a new era of individuals connected through devices and digital platforms, managing resources and assets through advanced technology.
From a social perspective, the driving force behind this resurgence in sharing is the renewed belief in community, peer-to-peer networks and real-time technologies, growing environmental awareness and the impact of the global recession.
From a business perspective, digital platforms have connected people across time zones, greatly enhancing the scale and efficiency of the sharing economy. In addition, the data generated by digital platforms is of enormous and inextricable benefit to data-driven business management. As such, it can be said that the internet has unleashed the new era of sharing.
Evolving Real Estate Approaches
The CRE market has been regarded as one of the most rigid assets in the sharing economy. However, with developments in digital technology, exploiting its potential and offering offices-as-a-service has become a phenomenon.
In San Francisco in 2015, programmer Brad Neuberg started the first shared workspace under the sharing economy umbrella, paving the way for a new era of value creation in the CRE industry.
According to an industry survey from deskmag, there will be more than 1.7 million people working in some 19,000 shared workplaces around the world by the end of 2018.
The rise of the sharing economy in the CRE industry, specifically shared workspaces, is pertinent to discussions surrounding adaptive and agile approaches. To survive and prosper in this market, CRE companies need to be able to quickly adapt to external changes and develop to meet the needs of their consumers.
“There will be more than 1.7 million people working in about 19,000 shared workplaces around the world by the end of 2018.”
Urbanisation and economic recovery has led to a rising demand for office spaces. However, limited urban land sources and environmental concerns have forced policy makers to take innovative approaches to managing civic sustainability. Customer demands are constantly evolving and, to keep pace with this, office providers must offer alternatives that support a modern, mobilised workstyle.
Under these latest market trends, the CRE business model has been profoundly transformed towards being more collaborative, flexible and efficient. The traditional linear approach to real estate focuses on resource control, internal optimization and customer value.
The new platforms are asset-light, though, emphasising resource orchestration, external interaction and ecosystem value. Digital platforms were one of the key enablers for this shared workspace business model. They have created value by enhancing idle space utilisation, meaning that along with automating processes, physical restrictions have been eliminated.
Shared workspace companies do not necessarily have to own any property. They are creating value by establishing partnerships with idle space owners and demand-matching in their business network.
For example, Spacious, established in 2016 in New York, has reimagined the idea of the workspace by establishing partnerships with restaurants which are closed during the day. This symbiotic relationship with space owners has allowed them to grow quickly and achieve the value proposition due to their notion of turning cities themselves into fluid workspaces for businesses.
“Users only need to turn on their mobile phone’s Bluetooth on arrival and departure at the workspace to check in and check out.”
Flexible membership terms give office users even more choice, since they can subscribe monthly, weekly or even minute-by-minute. An example of this is Croissant, a New York shared office company founded in 2015. They aim to offer affordable and flexible price plans and maximum convenience for business users so that members can work in any office close to them at any time.
In addition, their recently upgraded digital infrastructure has bolstered the automation of operational processes. Users only need to turn on their mobile phone’s Bluetooth on arrival and departure at the workspace to check in and check out. Charges are then automatically made to their credit card according to the time spent in the workplace.
Digital platforms have created a multi-sided marketplace of property owners, service providers and office users. Shared workspace companies are the aggregator and mediator among entities in the ecosystem.
Croissant has been continuously adding value to its members by offering services such as demand-matching, in-app purchases, virtual professional community collaboration, amenities services and more. Users’ data generated from the platform offers huge monetary potential to these digital platform operators.
However, the centralised infrastructure of the shared workspace business model poses a major threat to the true concept of the sharing economy. True sharing is a non-contractual, non-hierarchical or non-monetized form of interaction.
“Monetising consumer assets is not true sharing.”
As Martin Kenney and John Zysman argue, monetising consumer assets is not true sharing. The centralised infrastructure threatens the sharing economy business in the long-term because its motivations are intrinsically materialistic rather than social.
In other words, the intrinsic motivation of the centralised infrastructure fails to prioritise market demand. In the context of shared workspaces there are existing problems that threaten business model sustainability.
Recently, CRE companies have begun to incorporate blockchain technology into their business models in the form of the decentralised ledger, smart contracts and token systems.
The decentralised ledger is publicly accessible to anyone and keeps a permanent record of transactions on the platform. Therefore, it is transparent, immutable and secure, which is ideal for a peer-to-peer business model. There is no absolute power and no one can distort past or current records.
Additionally, blockchain includes smart contract features, which are sets of data-driven codes which enable the logic of automated verification based on customised system rules. In this case, they greatly enhance the efficiency and scalability of business.
“The token system has allowed decentralised value exchange, such as peer-to-peer sub-leasing through token exchange.”
Melanie Swan defines blockchain as, “the integration and automation of human/machine interaction and the machine-to-machine (M2M) and Internet of Things (IoT) payment network for the machine economy.”
What’s more, the token system has allowed decentralised value exchange, such as peer-to-peer sub-leasing through token exchange. From the token holder’s perspective, they have gained more control over the value of tokens and they can rent out their tokens for any period of time. From the perspective of the non-token holder, they have gained more flexibility in rental options compared to fixed-term membership.
The introduction of blockchain technology aims to bring an alternative mechanism to any centralised system relying on a single institution and to enhance the business model with regards to the level of trust, flexibility and automation.
Companies in this field, such as Knotel and Primalbase, operate their office space database on the open-source blockchain protocol, which has transformed the way property is listed, researched and recorded.
The database is more transparent and accessible, and is automatically validated. Members can aggregate property data directly with the validated mechanism, which eliminates the traditional centralised platform as mediator and opens access to the global market through peer-to-peer transactions.
The validation mechanism allows entities to modify and aggregate information on the common ledger, which has greatly increased individual control over the database, and ensures that the database is updated in a timely manner. Each time the user submits data to the database a smart contract is established to examine the validation confirmed by API or other parties before publishing it on the ledger.
In addition, the crypto token introduced by companies, or any other ERC-20 token, can be paid out to later parties once the data is validated. This makes the transaction more secure and efficient. What’s more, token holders can sub-lease their property for any period of time by renting out their token via the platform and, often, renting for shorter periods means charges are around 25%-30% higher than the long-term price. This means flexibility and the maximising of value for token holders.
Business Model Innovation Theory
Referring to the theoretical concept of the business model innovation theory, as put forward by Wirtz et al. (2017), any changes to a business model in response to external volatility can be viewed as a key source of value creation for sustainability. Based on the study of the CRE industry, the business model infrastructure requires agility to help it adapt to the mobile modern workstyle.
“The application of blockchain technology enhances the level of flexibility, trust and automation in the decentralised infrastructure while also reinforcing its ability to respond to external volatility.”
The application of blockchain technology enhances the level of flexibility, trust and automation in the decentralized infrastructure while also reinforcing its ability to respond to external volatility.
As for the notion of the sharing economy, the application of blockchain in business models diminishes centralised hierarchies and increases the opportunities for collaboration and integration, which leads to true sharing.
Externally, blockchain technology facilitates agility and the capability of business infrastructures to respond to market volatility. With regards to the internal value creation process, blockchain technology facilitates peer-to-peer transactions on a decentralized system which fulfils the demand for collaboration required to be considered true sharing.
Real estate isn’t, perhaps, the immediate area that comes to mind when you think of blockchain’s potential applications. So why is it one of the earliest adopters?
Primalbase answers this question in their FAQs, arguing that there are three reasons for adopting the token system they use. The first is as a means of ‘raising money to develop the project’ and building a ‘community with a stake in its success’.
The second is as a ‘simple universal measure of the value of renting membership from community members, the rising number of Primalbase locations, efficiency of the shared workspaces model, and operating profitability of the company’.
And, finally, because its tokens present a new ‘investment instrument because its market value can significantly change as the project develops.’ That about covers it, we’d say.
This article has been created by Xinyi Wu, Project Coordinator at The Research Institute. The field of emerging technologies is by no means bereft of ideas or inspiration; however, these alone do not equate to innovation neither do they drive technological advancement — quality Research and Development does. The Research Institute takes a practical approach to technological development and seeks to redress the balance between ideas and viable solutions.
llustrations by Kseniya Forbender
To contact the editor responsible for this story:
Margarita Khartanovich at [email protected]