Commercial investors are not rent-collectors any more but operators of space, which makes asset management more intensive and costly, it also offers a competitive advantage: adaptability in a fast-changing world, says Savills. Space can adapt to technological change, to dynamic business environments, to economic uncertainty, by offering to tenants what they need and maximising occupancy.
Eri Mitsostergiou, Director, Savills European Research, explains:
“Space as a service has captured headlines this year but 2019 has been another boom year for office take-up by flexible providers, which accounted for 12% of total take up across Europe, compared to 10.5% in 2018. The case of WeWork is a good example of the opportunities and risks involved in this model but despite negative publicity, the trend is irreversible and with several new niche operators, it is spreading across sectors.
“In retail there is demand for this type of space offer from both emerging and established brands. For landlords this may mean ‘white-boxing’ space with additional services, including customer data analytics, design, performance measurement, last mile logistics and marketing, on an all-in cost basis similar to the co-working model.
“Some landlords are already testing this approach as part of their overall offer. Macerich, a mall REIT in the US, launched ‘Brandbox’ in 2018, a turnkey concept largely aimed at digitally native brands who want to make the leap to physical stores. The offer is a complete package of flexible real estate and services.”
Within the residential sector, this trend towards flexible leasing and real estate or space as a service is evident within the co-living sector, a shared urban living concept which focuses on communal living could cause disruption in the multi-let residential sector as well, offering short leases, furnished apartments and a range of all-inclusive services.
Eri Mitsostergiou, Director, Savills European Research, added:
“This type of space meets the needs of students and young professionals who are struggling to find good quality living space at affordable prices in dense urban centres. Additionally, the concept is appealing to urban migrants who are looking to integrate and connect with other people. Companies like The Collective and Quarters who are strong in the US are also testing the European market starting from London and Berlin, while plenty of other operators have also defined themselves as offering “co-living” or ‘shared-living’ accommodation.
“The concept of space as a service is disrupting other property sectors too. Dark kitchens, food markets, pop-up stores are all concepts promoting flexibility and sharing and they support young businesses and start-ups. Flexspace in the UK for example is a provider of flexible office, workshop, industrial and self-storage space for small to medium enterprises.”