I started a co-working space company OnePiece Work in 2016. We expanded to 12 cities in 5 years and provided shared office solutions for more than 400 companies globally. From an operator's view, It's easy to start a co-working business, but the co-working business is not a technology platform that solves every pain of the office industry for landlords. As a flexible office operator and an individual who's passionate about office real estate, I interviewed 60 landlords in the Bay Area market, and here's why it's difficult to adapt the flexible office space future:
- 1. Difficulties in expanding the market: Landlords and brokers often spend way more money and effort on marketing than maximizing profit in their existing tenants because their limited geographic presence restricts their ability to develop companies' and brokers' relationships beyond their local market.
- 2. Lack of incentive in cross-market promotions: Many deal sizes have shrunk to smaller spaces and shorter terms. The commission structure is a total leased size x total contract terms. When the average deal size gets smaller, the incentives are no longer rewarding, and economically the return makes non-senses.
- 3. Increasing cost of hospitality: Do you know more than half of the landlords want to add services to improve the proximity of lifestyle in their buildings? Still, the expensive hospitality costs stopped them from moving forward. Property managers aren't experienced with frequent tenants shifting and delivering short-term spaces, techs, and workspace experiences such as making coffee, preparing lunch, hosting events, and booking meeting rooms that unlock productivity and delight employees.
- 4. Diversification: If 3 fail, 1 succeeds, and the landlord still succeeds. Because failure in doing 3 won't affect 1 success. The landlord's broad market exposure gives diversity. If 3 succeed, 1 fails, and the landlord still succeeds. Because the landlord's building gain service and strengthen capabilities for sustained growth.
It's no longer old news that how empty our office has become - "the city's (San Francisco) office vacancy rate is currently hovering at about 25% — up from a single-digit rate pre-pandemic. Experts tracking office space have projected that vacancy could increase to a range between 35% to 50% in certain downtown areas as part of a worst-case scenario that assumes current market conditions continue. Office tenants decline to renew existing leases or sign new ones. In that scenario, nearly 43% of the office space in SoMa could sit vacant by 2024.
Everyone who touched office real estate in the past made money, but competitive differentiation no longer hinges upon transactions alone. Today exceptions in operation are critical to outpace the competition. Unfortunately, I learned all the above by not only just conducting interviews but also by failing experiments with different solutions to test the market, such as:
- 1. Office-on-the-go. (Instant office booking for a team of the day)
- 2. Property management platform specializing in operating short-term office space.
- 3. Timeshare for office. (Reach full utilization of the office use)
- 4. Airbnb for workspace. (Give diversities of spaces for work purposes)
But the good news is that leveraging the most advanced technology and how the business world works today, I continue my learnings to build Veery, which aims to revolutionize office rental and management that brings flexible office solutions into the modern age. We maximize your property's attractiveness by offering comprehensive amenities, professional on-site management, and flexible terms, yet to give you tech benefits allowing you to track office status.
If you're the landlord or property manager and want to empower your employees to make office decisions, don't forget to ask these two questions:
- What would they quote your office for the culture and environment?
- What would you negotiate the amount down to?
For more content about the future of work, check out some of our other articles on veeryoffices.com/blog or follow us on social media @veeryoffices.
