- Property technology, AKA PropTech, is garnering attention and funding and it is innovating the property and CRE markets.
- PropTech is impacting all markets of commercial real estate, including the flexible workspace industry.
- PropTech can provide flexible workspace operators with useful data and insights to find property where they can expand their footprint.
This article was written by Richard Sarkis, CEO of Reonomy
While often overshadowed by FinTech, its big brother, PropTech is on its way to giving its older sibling a run for its money. Property technology, otherwise known as “PropTech,” is transforming the antiquated real estate industry so much that data shows venture capital in property and CRE tech cleared $11 billion in 2017 alone. This is a strong indication that what was formerly considered a niche tech submarket is finally garnering attention and funding from a wide range of professionals to innovate the market.
Now, investors are seeing untapped markets in enterprise products that leverage data and analytics that make internal discovery processes more efficient, and in turn, make significant impacts on top and bottom lines alike. Ultimately, this has resulted in a digital zeitgeist that spans all sides of the industry–including coworking.
With an abundance of capital and attention from investors, how will this sudden surge in PropTech affect flexible workspace ventures?
The industry has already seen coworking companies providers perk up, with leaders like WeWork and Knotel riding the PropTech wave and leveraging data to make smarter investments. On top of the overall growth in the industry, (it’s predicted that the number of employees who leverage flexible workspaces will top 3.8 million by 2020), coworking providers will need to continue to invest in PropTech to find ideal properties and better differentiate themselves from the competition.
More Streamlined Sourcing
It’s no secret that coworking spaces have traditionally been used as a hub of creativity and collaboration for start-ups and small businesses. And now, companies of all sizes are taking advantage of the collaborative and creative appeal of coworking, passing up on sequestered office design for synergetic space.
In the last two years alone, approximately one-quarter of all signed leases were with coworking spaces. Demand for space is increasing, making it imperative these businesses have the tools to stay ahead of the curve.
In our partnerships with WeWork and Knotel, I’ve seen first-hand how real estate data can simplify the search for office space. Rather than relying solely on properties marketed on listings platforms, these industry leaders are taking advantage of comprehensive, off-market commercial real estate data to search and explore more than 75,000 different office buildings across the nation. Reonomy can serve them property data in real time, allowing them to expand their scope and handpick target properties to pursue.
Demands for a Distinct Experience
As the coworking market becomes increasingly saturated, the need for distinct tenant and employee experiences will become vital to help companies separate themselves from the competition.
To attract companies and individual employees, coworking spaces are becoming more like expansive mixed-use hubs with a plethora of different perks. From fitness centers and yoga studios, to baristas and coffee shops, companies are building out their flexible spaces with enticing offerings to attract new business. WeWork, for example, recently partnered with J.Crew to host exclusive pop-up stores in WeWork locations around the country. Similarly, women’s club and coworking space network The Wing announced on-site childcare offerings for its 6,000 members across their five different locations.
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To find more mixed-use properties and see space details, coworking companies will need data-rich proptech to simplify their search. These platforms provide ample data to explore and help coworking providers increase their mixed-use footprint. Users can also dive deeper into property specifics, like the number of units, building area, and existing floor area ratio, to determine how exactly they’d maximize their mixed-use space.
The Need for Non-Traditional Space
Similarly, the non-traditional workspace is becoming more attractive to flexible workspace providers. Since space is limited, more companies are beginning to think outside of the traditional office building and are transforming other asset types into unique workspaces. Warehouses, restaurants, and expansive “big box” retail spaces, specifically, have begun to catch the eye of coworking companies.
Why are companies looking toward other asset classes besides offices for flexible working spaces? For starters, large scale warehouses and other boxy buildings have more physical room to rent. Rather than limiting rental space to a single floor, companies are beginning to capitalize on the vacant space these properties have to offer. For instance, WeWork recently purchased the iconic Lord & Taylor flagship store in Manhattan, with plans to create new headquarters and abundant leasing space.
This trend isn’t exclusive to coworking providers–other industries are hopping on the bandwagon for repurposing, as well. Retail, specifically, is taking advantage of the agile office trend to turn empty storefronts into income-generating commercial real estate. For example, Office Depot announced the pilot of their “Workonomy Hub”–a new coworking space housed in the vacant brick-and-mortar shell of their previous Los Gatos, California location.
Again, coworking providers are, and will continue, investing in data to empower the search for these specific types of properties. The more granular data gets into property specs and sizes, the more insight coworking spaces have into their property options. Reonomy users, for example, can see exactly how expansive these big box properties are to better determine whether or not there’s value in repurposing them.
There’s no doubt PropTech is redefining the way companies, particularly agile office providers, are sourcing and analyzing their property options. As the market grows and competition for space flares, PropTech will become a necessary tool for coworking companies looking for long term business success.