CoreNet Examined Workforce Space Disruptors at Recent Real Disruption Event

By Mike Hoban

Boston - Those who have attended the MIT Center for Real Estate’s “Real Disruption” series know the feeling of walking away from the event and having two distinct reactions – often in rapid succession. The first involves thinking about the way that the disruptive technology can potentially benefit either them as individuals or the industry as a whole; and the second thought inevitably focuses on which industry segment is most likely to be adversely impacted by the new developments.

CoreNet’s event, “Real Disruption: The Sharing Economy and Commercial Real Estate”, held this week at the new Steelcase/Red Thread Boston WorkLife Center, presented two companies with models that, while “disruptive” in the sense that they challenge conventional ways of delivering office space, should have little detrimental affect on traditional leasing models - and may prove to be a boon. The technology also serves the needs of startups, small companies, and individuals learning to best address their workplace needs, as well as larger companies seeking office space for remote workers.

CoreNet tabbed “Real Disruption” series founder (and Head of Industry Relations for the MIT Center for Real Estate) Steve Weikal to moderate a panel that included David Miller, Corporate Development Manager for PivotDesk, which has developed a fee model, which allows companies with excess office space to sublease to startups and small businesses without the traditional landlord responsibilities; and Bill Jacobson, Co-Founder & CEO of Workbar, a membership-driven network of high-quality, cutting edge co-working spaces.

Weikal began with a quick primer on the impact that disruptive technologies are having on the commercial real estate industry, particularly in recent years. Over the last few decades, breakthroughs in technology, such as cloud computing and the widespread use of mobile devices, have completely upended virtually all business models - but the CRE industry has been particularly slow in embracing these technologies. “But we’ve got an increasingly tech savvy workforce that is demanding tools that are easy to use and make their lives a lot easier,” asserted Weikal. “And tech follows the money. … this is a $16 trillion industry (in the U.S. alone) and the tech folks are taking a look and trying to take advantage of that.”

As a result, over 400 CRE tech startups have launched in the last three years, with over 50 property/portfolio management platforms and 75 crowdfunding ventures listed among the new firms. Venture capital investment has increased exponentially in the sector, from $200 million during the period from 2011-2013, to $680 million in 2014, and $1.7 billion (globally) in 2015. Weikal referred to what the RE tech companies are doing as “real estate fracking. Using technology to break a real estate asset apart and put it back together into something more productive.”

With 35 percent of the total workforce classified as “independent” workers, (i.e., not employed by a company) – a figure that is expected to swell to 40 percent by 2020 – there has been a pronounced increase in co-working spaces in recent years (3,600 as of 2015), as workers who like the flexibility of remote employment find they still feel the need for a sense of community (as well as the shared resources) that an office setting provides. The technology explosion has also fueled an entrepreneurial spirit that has startups and smaller companies seeking workspace that may be subject to rapid expansion (or dissolution), and are seeking shorter term lease commitments while they determine their needs. These and other trends have spawned a number of startups that seek to provide solutions to the changes in the way that people work, and range from the practical to the seemingly absurd.

PivotDesk is a four year-old company that has offices in 29 cities (including Boston) and lists over four million sf of office space. PivotDesk follows the Uber technology model, Weikal explained, “where the technology enables the interaction, but they don’t own or control the asset.” Companies that have excess space (in anticipation of future growth, for instance) contract PivotDesk to fill their empty desks, and PivotDesk lists the space on their website (including the number of available desks, conference room space, amenities, etc.). Companies (typically with 5-25 employees) looking for a short term space commitment can then “share” the office with the host company, with the space seekers subject to approval of the company that is hosting.

Miller called his firm, “Airbnb for office space…with the only difference being that our companies are not coming in for a day or two and leaving, this is month to month, and the companies come in for an average stay of between 9-11 months.” Desks are approximately $550 per month in Manhattan and $400-$425 in Boston. Miller said the firm is not looking to “take over co-working or traditional leasing” but instead sees his company as a niche provider that can be a “steppingstone to a traditional lease.”

Workbar was founded in 2009 when the company that Jacobson was subleasing space for his startup from folded without notice. He went to the landlord and pitched the co-working and shared office space idea (while maintaining his own business), and given the poor leasing market at the time, the landlord agreed. Jacobson began filling the available desks with a variety of individuals and small businesses seeking office and conference room space, while the landlord continued to show the space to potential tenants. “Interestingly enough, the landlord received multiple offers (on the space) that were above market rate at the time, because we showed much better than any vacant space because of all of this energy and activity that was going on at Workbar,” relayed Jacobson.

Workbar then moved to its current Boston location at 711 Atlantic Ave. after the space was rented, and the firm now operates a dozen locations in Boston, Cambridge, Somerville, and Arlington as well as locations as far out in Greater Boston as New Bedford, Lowell, and Worcester. Workbar serves a variety of workspace needs for individuals, established businesses with a small (2-10) workforce, startups, and regional and national companies that have employees that work remotely and need an office outpost, using a membership model that allows participants access to the various locations. Each location offers a community feel, with a café that hosts networking events on a regular basis, and there are locations that cater to specific industries. Workbar also recently entered into an agreement with Staples that will convert a portion of their stores in Danvers, Norwood and Brighton into their shared office concept.

Once the idea of the sharing economy of Uber, Airbnb and Zipcar took hold, the way people use and view real estate also began to shift dramatically, said Jacobson. “The business community is not using real estate as much to show their presence and that they have longevity. That was the old way,” he stated. “Now you want to show that you’re nimble, flexible and can change on a dime. Those are the things that are being valued a lot more in the business community. And the rise of co-working and more flexible options in real estate fits right into that market.” He cited Adobe and AT & T as early adopters of co-working as way to optimize a firm’s real estate options.

“Some of these (disruptive) technologies are evolutionary and some are revolutionary, and what we heard today is that there is an evolution at work that has some revolutionary aspects, but (Workbar and PivotDesk) are enabled by technology rather than being about (a sea change),” observed Weikal following the program.