Disruption in Commercial Property 

Revisiting an article, I wrote back in 2013 (The Future of Work), recently got me thinking about disruption – specifically disruption in the world of commercial property. While we have witnessed incredible revolutions in the way we communicate, travel and live, thanks to the sharing economy, these disruptive changes have not been reflected in how we deal in property. Specifically, commercial property. Learning from insights provided by the “proptech” market, we can see that most innovation can be found within the residential sector.

This may, in some way, relate to the nature of commercial buildings – large, fixed and filled with tenants on long term leases. Innovation around these commercial centres has been realised through technological innovation and administration – not disruption.

How property is transacted is perhaps the best example of the slow pace of change with commercial real estate. To lease office premises, you have to follow a process that has not changed in decades. Beginning with a phone call followed by a meeting with a middleman in a suit who has a key to let you in to the premises. Now, of course, that office space can be found via Google – so there is technology in the picture, but nonetheless, a middleman in a suit with a key is there to unlock your property.

At a recent property industry event in Sydney, a panel of office market experts was asked by the moderator if they believed we needed office leasing agents anymore. The senior leasing agent on the panel fielded the question well but the nervous ripple of laughter across the room, half of whom were agents, was telling. This role may not be consigned to history in the near term but it will certainly be redefined.

Back in 2013 I anticipated that we would have embraced remote working more than we already have. It’s certainly grown in popularity, but the fixed place of work seems to be more resilient than ever, in some organisations it’s growing. My suggestion that office-sharing apps such as ‘Liquidspace’ would become the Airbnb for office users, has not eventuated. Why is this the case? Like Airbnb, it seemed an ideal opportunity to marry unused meeting rooms and workstations with those who need just that on an hourly or daily basis. Presently, it would seem the majority of spaces available on the app are simply serviced office spaces. A sales mechanism for serviced office operators was not the original idea but that seems to be where it is at the moment.

It is with the serviced offices where we are seeing perhaps the greatest change. The sector is booming and the nature of those offices has come a long way from the early timber panelled corridors flanked by room after room. Serviced offices convert the traditional, immovable and rigid office lease into short term and flexible space. The operator carries the risk and the user pays a premium for that risk. The next step must be that commercial building owners will become serviced office operators themselves. Market demand will force them to. This has already begun but it will become mainstream. The sheer potential for reducing waste and energy that goes with shared environments means that this kind of disruptive initiative is worth pursuing.
 

Ashley Patterson February 2018