Brave Ideas

Andy Pyle, Head of UK Real Estate for KPMG, joins Bold Founder, Caleb Parker, to chat about valuing Space-as-a-Service income streams within real estate assets.

Andy believes the Space-as-a-Service mindset is going to end up being 100% of the real estate market.

He says Covid has driven corporate occupiers to ask why they have offices, and many occupiers will give space back to landlords via break clauses, defaults or at lease events.

Therefore a lot of space will need to be repurposed to meet the demand of what people want.

This means real estate is becoming a business to consumer proposition, and the capital markets need to get their head around valuing the income streams generated through the multiple service layers of the Space-as-a-Service Model.

In this episode you're going to hear how KPMG values Space-as-a-Service assets, why Andy believes service drives retention and value, and how re-purposing retail assets as Space-as-a-Service can not only save retail landlords, but also support local entrepreneurs and spur job creation.

Connect with Andy on LinkedIn

Connect with Caleb on LinkedIn

If you have any questions or feedback on this episode, email [email protected]

Value Bombs

• The Space-as-a-Service (SPaaS) mindset is going to end up being 100% of the market
• Covid has driven corporate occupiers to ask why they have offices
• Occupiers stuck in long leases will start to partner with SPaaS operators to re-purpose space and reduce long-term liabilities
• Many occupiers will give space back to landlords via break clauses, defaults or at lease events
• Space will need to be repurposed to meet the demand of what people want
• Real estate is becoming a business to consumer proposition
• Providing more services improves customer retention and margins
• Enlightened landlords have already recognised they need Space-as-a-Service in their portfolio
• Space-as-a-Service has become an essential part of the product mix
• Lease arbitrage in Space-as-a-Service is not sustainable. Landlords should move to partnership models with operators.
• The capital markets need to get their head around the multiple income streams in Space-as-a-Service
• Space-as-a-Service assets never go to zero, whereas if an asset has 1 large occupier, if they move out the income of the asset goes to zero
• Valuation should be the sum of the parts: intrinsic value of building + multiple service layers and the income they produce
• Buildings operated as customer centric offer more services and therefore customer profitability increases
• We should value Space-as-a-Service income streams as a business, not a "real asset"
• If RICS doesn't evolve their valuation model for Space-as-a-Service we'll start to see a RICS value placed on the core asset, and a business valuation firm value the service layers on top as a business.
• SPaaS is also relevant for retail and industrial assets
• There is too much retail space; some should be repurposed to SPaaS to support local entrepreneurs and spur job creation.
• This would support the hub & spoke real estate strategy of many corporate occupiers
• Network effects help when valuing an asset to compare trends across the various income streams

About Andy Pyle

Andy is Head of UK Real Estate for KPMG, and is responsible for overseeing all of the firm's services to Real Estate clients. He leads KPMG's transaction advice to fund managers, direct investors and corporates on large and complex real estate acquisitions and disposals, particularly portfolio deals or where assets are sold in corporate structure. He is a chartered accountant and has significant experience as a reporting accountant on real estate IPOs and capital market transactions.

With 25 years of professional experience, of which the last 18 have been as a full-time transaction adviser, as you can imagine Andy has advised a number of investors who have bought and sold real estate assets in the UK and Europe across the diverse range of sectors, including commercial office, retail/shopping mall, industrial/warehousing/logistics, residential, self-storage, student accommodation and serviced office sectors covering both development and investment assets. He has advised on some of the largest transactions in the European real estate market.

You may have seen Andy on stage at one of our industry's top conferences. He regularly speaks on the impact of tech disruption on the real estate sector. Speaking of tech Andy leads the Technology & Innovation Working Group for the British Property Federation and was placed 6th on the LendInvest PropTech Powerlist.

If you're on Twitter, go follow Andy. He's @AndyJPyle and he often challenges our industry with thought provoking commentary that's landed him on Duke Long's Top 100 Commercial Real Estate People You Must Follow On Twitter.

Sponsors Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co) Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast Apple | Spotify | Google | Stitcher | Podbean

Evelyn Lee, Editor for PEI Media joins Bold Founder, Caleb Parker to discuss her article on how to value office buildings with Space-as-a-Service.

Evelyn just published a research piece on valuing Space-as-a-Service assets in PERE, the Private Real Estate Magazine in PEI's portfolio.

Read article here: https://www.perenews.com/how-to-value-flex-office-investments-covid-19/

Representatives from the valuer community and capital markets have taken a stance on #SpaceAsAService. They expect demand to continue to grow, and properties without a Space-as-a-Service component will be valued less.

In this episode, Evelyn and Caleb dive into the article and her interviews with the experts quoted.

She explains why valuing Space-as-a-Service has been a challenge for commercial real estate, but how this is changing.

We learn why moving from leases to management agreements makes more sense for landlords, and how brand can play a role in driving building valuations.

You're going to hear about a new investor profile emerging and whether a new asset class is needed for this fast growing segment of commercial real estate.

Connect with Evelyn on LinkedIn

Connect with Caleb on LinkedIn

If you have any questions or feedback on this episode, email [email protected]

Value Bombs

High Growth Demand for Space-as-as-Service

• Space-as-a-Service is becoming a hot topic in the capital markets
• The customer experience delivered by WeWork became a value driver for assets
• Demand for Space-as-a-Service will continue to increase post Covid
• Uncertainty is driving the need for flexibility
• Accounting changes for long-term leases is causing enterprise to rethink their real estate strategy
• Landlords should incorporate Space-as-a-Service now in their buildings as an important way of future proofing their portfolios because there is an expectation there will be a premium for those types of assets given Customer interest and demand
• On the flip side, buildings without Space-as-a-Service components will be discounted
• Space-as-a-Service will drive premiums Risk mitigation via management agreements
• We're going to see a shift in Landlords from leases to management agreements for Space-as-a-Service
• The lease model was perceived as being more stable and less risky, but in recent times that theory has been proven wrong.
• It's less risky for the landlord if they have a profit share or management agreement in place with a Space-as-a-Service operator, because it gives the landlord more control, and a share in the upside. Evolving valuation methodologies
• The industry needs to evolve valuation methodologies to value income streams from Space-as-a-Service
• Income streams driven by Space-as-a-Service components should be split out from the NOI of an asset and valued separately, potentially at a premium to how a traditional lease would be valued
• New valuation methods for Space-as-a-Service should look like hotel industry valuations
• We'll potentially see two investor profiles teaming up to acquire assets in the future
  • Low risk profiles to invest in the core asset income stream
  • Higher risk profile to invest in the Space-as-a-Service income stream
• Layering the right brand on top of an asset can enhance its valuation

Resources

1. Evelyn's article
2. Isabelle Scemama, Global Head of AXA IM Alts & CEO of AXA IM - Real Assets
3. Stephane Theuriau, Partner at BC Partners
4. Richard Kalvoda, Head of the Advisory Practice for Altus Group
5. Emma Swinnerton, EMEA Head of Flexible Workspace for Cushman & Wakefield

About Evelyn Lee and PEI Media

Evelyn is Editor at PEI Media, where she's spent the last decade covering real estate for the private equity community. Originally working out of the company's NYC HQ, Evelyn moved to London 2 years ago and has been covering the global market.

PEI has a global portfolio of 12 digital financial information and magazine brands that deliver critical market intelligence for professionals in specialist financial markets such as: private equity, real estate, infrastructure, private credit, agriculture and compliance.

They have a diverse team of more than 250 media, information and events specialists worldwide, and hold 50+ events globally to help their customers gain unique insights, make important business connections, and ultimately facilitate better investment decisions.

PEI focuses on the alternative and typically illiquid asset classes that have become essential components of many investors' allocation strategies globally. They major in private equity, real estate, private debt and infrastructure investing, whilst also engaging with emerging new asset classes.

Sponsors Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co) Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast Apple | Spotify | Google | Stitcher | Podbean

Joanna Turner, Head of Property Research for Canada Life Asset Management (recently rebranded), joins Bold Founder, Caleb Parker to talk about how Canada Life is evolving their assets for hybrid working.

Joanna says the future of work doesn't mean reduced demand for commercial real estate. Working from home and going to the office will go hand in hand.

But she says demand for Space-as-a-Service and flexibility will grow faster as we shift to hybrid working, so every major landlord has to become Space-as-a-Service minded.

She believes conventional real estate managers should partner with experienced Space-as-a-Service operators to meet customer demand.

We also talk building valuations and have some feedback for the valuer community, as well as lenders, who Joanna says need to evolve their criteria to recognise the growth in demand for Space-as-a-Service.

Connect with Joanna on LinkedIn

Connect with Caleb on LinkedIn

If you have any questions or feedback on this episode, email [email protected]

Value Bombs

• The future of work doesn't mean reduced demand for #CRE
• The reasons people need an office is changing
• Landlords need to be flexible and adaptable to meet the new demands from customers
• There will be a flight to prime quality space, and low quality secondary space will see higher vacancy rates
• Working from home and going to the office will go hand in hand
• People will commute to the city centre ONLY if its rewarding
• The role of the office will change from being a place where you go to work, to a place to meet and collaborate face to face, and be inspired.
• Buildings need spaces that enhance the #wellbeing for people
• Every major landlord has to become Space-as-a-Service minded
• Flexibility should be top of mind, because that's what customers want
• Demand for Space-as-a-Service and flexibility will grow faster as we shift to hybrid working
• Conventional real estate managers should partner with Space-as-a-Service operators to meet customer demand
• Valuers need to ask themselves "What is it I'm actually valuing?" Are the additional service layers adding additional value for the customer, more revenue streams, more diversification, therefore more value to the asset?
• Should covenant strength of building users no longer be a factor in the valuing of Space-as-a-Service footprints?
• Operators need to be more transparent with landlords around data and financials
• When valuing a building, valuers should be asking whether there is higher demand in that particular market for conventional leases or is there more demand for flexibility and service
• Lenders need to evolve their criteria to recognise the growth in demand for Space-as-a-Service

Resources (Aka, mentions from Joanna)

• Joanna's Property Week Article
• Jan Gehl (cities architect and the godfather of placemaking) His book: 'Cities for People' His short film 'The Human Scale'
• Ken Shuttleworth, Architect at 'Make'
• Anouk Khan, CFO RE:Women
• Maria Wiedner, CEO of RE:Women Twitter: @rewomenorg
• Andrea Carpenter from Women Talk Real Estate
• Abigail Dean, Head of Sustainabiity, Nuveen
• Nina Reid, Director Responsible Property Investment, M&G
• Nikki Greenberg (futurist and proptech guru, NYC)

About Joanna Turner

Joanna Turner is Head of Property Research at Canada Life Investments.

In her role she is responsible for managing research and strategy, which includes forecasts, thought leadership, house views, quarterly reporting and writing regular research content.

Joanna has twenty five years' experience in Property Research & Strategy at a global, European and UK level. Prior to Canada Life, she worked as an Associate Director in DTZ's Global Forecasting & Research team, and has gained experience at major global property fund managers such as AXA Real Estate, LaSalle Investment Management and Invesco, as well as Cushman & Wakefield's European Research team.

Joanna holds an Masters in Real Estate Investment from Cass Business School, City University London and a BA Honors from Manchester University. She also speaks Spanish, German and French, as well as her native English.

She is a committee member of the Society of Property Researchers, organising regular industry events and is a member of the Investment Property Forum. She writes regular blogs on behalf of Canada Life Investments and has had articles published in major property journals such as IPE Real Assets, Property Week and Euro Property. She is passionate about ESG and climate change, diversity and inclusion in the real estate sector.

Sponsors Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co) Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast Apple | Spotify | Google | Stitcher | Podbean

David Cairnes, Senior Vice President - Office Leasing for CBRE in Toronto, Canada, joins Bold Founder Caleb Parker to challenge commercial real estate to bet on Space-as-a-Service.

He says it doesn't matter what the capital markets or landlord community wants, customers want flexibility and service, so if you're in commercial real estate you need to evolve in order to stay relevant.

He believes "Space-as-a-Service should be part of every office landlord's leasing and retention strategy".

In this episode you're going to learn the difference between flex and Space-as-a-Service, some details about 3-way deals transacting between landlords, customers and operators, and how asset owners can make their buildings more attractive for high quality occupier customers.

Finally, Dave helps us understand how it makes sense for Space-as-a-Service to become less risky for landlords, yet still save customers money.

Connect with Dave on LinkedIn

Connect with Caleb on LinkedIn

If you have any questions or feedback on this episode, email [email protected]

Value bombs

• The landlord community isn't providing enough Space-as-a-Service to meet customer demand
• Enterprise technology customers are starting to partner with flexspace operators, and are approaching landlords in tandem to transact deals
• This type of deal enables the customer to take the long lease required by the landlord, but offset the cost liability of having too much space before they grow into it
• These enterprise technology companies are comfortable managing risk in this way, whereas the landlord isn't
• Landlords need to embrace these deals and make it easier to facilitate provisions for this in the terms of a lease
• But this should be a leading indicator for the landlord community as to what customers want. Not all companies can do deals like this, but many want these same benefits
• Landlords need to partner directly with Space-as-a-Service operators to solve problems for occupiers
• Otherwise, the customer ends up in unfavourable sublease terms
• Landlord-operator partnerships are more sustainable relationships that create stable pricing models for the customer
• The agent community has a lot to gain by brokering more Space-as-a-Service partnerships between landlords and operators
• There is a difference between flex and Space-as-a-Service; flex is a feature of SPaaS
• Space-as-a-Service should be part of the leasing and retention strategy at the outset for new developments
• Bringing in a high caliber operator makes a building more attractive for high quality occupiers
• Regardless of what the capital markets or landlords want, customers want flexibility and service, so commercial real estate needs to evolve in order to stay relevant
• Landlords needs to think about service and hospitality holistically
• Amenities should be revenue drivers, not line items in the service charge

About David Cairnes

Dave started his career out of university as a professional poker player. He was ranked in the top 100 online tournament players in the world for a time. In 2012, Dave transitioned from poker to commercial real estate, becoming an office leasing broker in downtown Toronto, Canada. Dave rose quickly through the ranks and is now one of the top office brokers in Canada, where he's focused on high growth companies, Space-as-a-Service operators and landlord representation. The analytical & interpersonal skills he honed as a poker player helped him become an excellent negotiator regardless of which side of the deal he is on. Dave is also an avid "futurist" when it comes to the office market and can be found on LinkedIn talking about the importance of delivering space as a service going forward.

And because he's a "futureist" he cofounded CBRE Forward (www.cbreforward.com) where he showcases the success stories of Canada's most innovative companies, providing tailored real estate insights to high growth companies, and interviewing authorities on the future of work (#MovingForward).

Sponsors Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co) Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast Apple | Spotify | Google | Stitcher | Podbean

Chief Exec of NewFlex, Steve Jude, joins Bold Founder, Caleb Parker to share his story and insights leading the UK's largest Space-as-a-Service operator deploying a hotel-style management agreement model. Steve's a veteran of Space-as-a-Service and has personally been involved in 70 management agreements.

In this episode you will learn the story of how NewFlex got started, how a multi-brand strategy helps asset owners meet customer demand, and why hotel-style management agreements keep landlord & operator partnerships aligned. Steve shares a few tips for asset owners thinking about Space-as-a-Service and management agreements, including how to navigate the potential conflict between a brand's ambition and asset owners business plans.

Connect with Steve on LinkedIn: https://www.linkedin.com/in/steve-jude-71a296132/

Connect with Caleb on Twitter: https://twitter.com/Caleb_Parker

If you have any questions or feedback on this episode, email [email protected]

Value bombs

• In a management agreement world, the client is the asset owner and the customer is the building user
• We should expect consolidation ahead for Space-as-a-Service, particularly among operators on the lease arbitrage model
• Not every building needs Space-as-a-Service, but every asset owner should ask whether its right for their asset right now
• Landlords need to be thinking about why people need to come to their office, because for the first time in history the customer (occupier) has a choice of whether to take an office or not.
• We have to understand how we can help our customers make more money
• The future of work is smaller head offices and a distributed workforce
• Distributed teams needs on-demand access to spaces that facilitate collaborative and creative work, often closer to where they live
• We have to build and deliver spaces that help deliver the outcomes that people want
• Landlords should deploy Space-as-a-Service to help their customers make more money
• "75-80% of C-level asset owners I talk to are thinking about Space-as-a-Service"
• There's about to be an explosion in demand for management agreements for Space-as-a-Service
• Tips for asset owners bringing in Space-as-a-Service:
  • Don't do a risky SPV lease
  • Think about what the ideal outcome for an asset, then partner with an operator who is aligned and will help you achieve that outcome
  • Brand matters to attract the right customer, but find out the motive of the brand owner. Are they more interested in building for an exit than making money for the asset?
• Brand didn't need to make sense in the past for CRE. But as we move from B2B to B2C brand becomes more important
• The future of the office is like a hotel for workers, so the capital markets need to value Space-as-a-Service like a hotel.
• How do you value 30% of the market that doesn't fit the rules of the game?
• Right now there is a lot of money tied up in the old way of valuing buildings - should there be a bridge to help investors transition to the right way to value Space-as-a-Service?

About Steve Jude

Early in his career, Steve specialised in marketing for the travel industry, working with some big names, such as British airways, TUI, and Avis car rental.

He became a specialist in yield management, and by chance met Regus CEO, Mark Dixon one day. The two got to talking and Steve, not knowing anything about the then serviced office industry, convinced Mark that Regus was just a yield management business. The rest is history as Steve joined Mark to become Worldwide sales & marketing director for Regus through their floatation.

After that, Steve went into private equity for a bit, then became a privateer to turnaround companies that were struggling. 13 years ago he took on the struggling serviced office brand Citibase, turned the company around, and led them through the GFC to become stronger than ever before.

And now he's Chief Exec of NewFlex.

Sponsors Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co) Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast Apple | Spotify | Google | Stitcher | Podbean

Welcome to Season 3 of the highly popular #WorkBold podcast.

Caleb Parker, Founder of Bold, returns for another season to challenge commercial real estate on the only podcast in the world dedicated to the future asset class called Space-as-a-Service (SPaaS).

Now downloaded in 49 countries, each week Caleb chats with the leading experts in commercial real estate to prepare you for the new world of service in real estate.

This season we have a solid lineup - including Canada Life Investments, CBRE, KPMG, Nuveen and Trilogy Real Estate to name a few - with a focus on valuation methodologies, and more expert discussion on Space-as-a-Service.

This podcast is for anyone involved in commercial real estate in any way. If you're an investor, fund manager, developer, property manager, agent or broker, be sure to subscribe so you don't miss an episode.

Subscribe to the #WorkBold Podcast

Apple | Spotify | Google | Stitcher | Podbean

Don't have time to listen?

(Read the transcript of this trailer below)

Welcome back to the WorkBold podcast

Where we chat with the leaders in commercial real estate to answer all questions Space-as-a-service.

This podcast is for anyone involved in commercial real estate in any way. If you're an investor, fund manager, developer, property manager, agent or broker, be sure to subscribe so you don't miss an episode.

I'm your host, Caleb Parker, and you're listening to a preview of season 3, where Space-as-a-Service Comes of Age.

I'm coming out swinging this season. Demand for Space-as-a-Service will overtake demand for long-leases soon. It's time for the capital markets to wake up. Because what happens to value when demand for your product, long leases, goes away. It's time for Space-as-a-Service to have it's own asset class, with industry recognized risks and yields, and perhaps a new type of investor profile.

Each Sunday over the next 10 weeks we'll drop a new episode with the leading experts in commercial real estate to prepare you for the new world of service in real estate. We have a solid lineup, including Canada Life Investments, CBRE, KPMG, Nuveen and Trilogy Real Estate to name a few.

If you're tuning in for the first time, I am Caleb Parker, Founder of Bold, the Space-as-a-Service brand for entrepreneurs and innovators. We are now part of the NewFlex family of brands, and we help asset owners and landlords drive value by future proofing their portfolios.

But enough about me. Let's get down to business.

Real estate has been, done, the same way for the last century. And, the customer has always been, the people, who are investing in real estate. But, the customer today is, really the person who uses the building. It could be the people who are in a lease for 10 years, it could be the people that are popping in for a meeting room, for a day, or it could be the guest of those meetings. But the end user, the person coming to the building is really the customer. And so I believe real estate needs to move from product to service, and service those customers.

I believe entrepreneurs and innovators make the world a better place. Over the last decade, I've dedicated my work to supporting and championing entrepreneurs. I love entrepreneurial thinkers. I'm an entrepreneur at heart.

Today business deals happen faster than ever. We contract with people thousands of miles away online and on-demand. Our work is not restricted to a static location. We don't "need" an office to work from.

Our work happens everywhere: at home, on a plane, on our mobile phones.

But, to grow and succeed, sometimes we do need a place to come together with our team, our customers, and our partners.

Commercial real estate hasn't been friendly to entrepreneurs, though. "If" we're approved, we have to pay big deposits, spend thousands on legal fees to oblige us to pay for a long time, for the right to a white box that becomes our responsibility to make it fit our culture and business needs, and then pay more to make it a white box again when we're done.

This is the opposite of what a fast-growing company needs from commercial real estate. Yes, we need access to fantastic environments sometimes, but we also need agility. We need to manage risk. The logic of permanent offices and expensive long leases feels outdated in this new economy that we're in.

I'm not trying to beat up on commercial real estate. It was natural for the industry to operate as it has because the customer has always been the investor, not the end-user.

But it's time to flip this and put the customer at the center of our universe.

Demand for Space-as-a-Service from the end-user has been growing steadily since the global financial crisis of 2008, and we've seen massive growth in the last few years. The end-user must become the customer.

Because what happens to value when the demand for your product goes away?

And it's not limited to entrepreneurs and small businesses.

Schroders chief exec Peter Harrison was quoted by the Financial Times last week saying "In the space of a few months, we have made 20 years' progress in attitudes towards flexible working and we are going to continue with this momentum."

If that doesn't make you reflect, nothing will.

I could list all the headlines of companies like Twitter, Facebook, Amazon and so many more going remote first, but you've seen these headlines.

Perhaps a more powerful, and impactful announcement was that PwC Expects the Majority of their U.K. Staff to Work Remotely after the Virus, BUT "A blend of office & home working is the future" - stating there's still very much a place for the office.

I say the traditional office is dead. The office as we knew it is dead.But "the office" is not dead.You see, companies who lean into the future are using flexible working as a talent acquisition tool.

So the future is about workplace choice, democratising the choice of where people work.

More than ever, we will have a choice of where, when, and how we work. We will choose places where we feel taken care of and produce our best work.

That's what Space-as-a-Service enables.

The fundamentals of Space-as-a-Service are hospitality-driven. Buildings should provide customers with everything they need in one place paired with excellent customer service, to really drive value from that building.

Customers want flexibility and on-demand accessibility. That's not just about the building. It's about providing a space for customers to live and breathe their creativity. It's about creating a consistent experience, a brand that connects to specific customer personas.

Landlords who are able to provide this are set to be the big winners of this change. By offering Space-as-a-Service, landlords can future-proof their assets, monetize their space, and drive value for customers and themselves. We need to put the customer at the center of the universe and build from there.

In a flexible working world, this is what keeps paying customers in a building, not long leases.

So building valuations need revising to at minimum recognize revenue generated by Space-as-a-Service. But I believe we need a new asset class to value the buildings which shift from the static white box to providing layers of dynamic service to the customer of today, the building user.

And that is how Space-as-a-Service comes of age.

Thank you for listening, we have a great season ahead with a focus on the valuation topic, and more expert discussion on Space-as-a-Service.

Don't forget to subscribe in iTunes, or your preferred podcast listening app.

And remember, Fortune Favours the Bold.

Sponsors

Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co)

Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast

Apple | Spotify | Google | Stitcher | Podbean

Tushar Agarwal, Co-Founder & CEO of HubbleHQ, the leading online marketplace for finding and renting office space in London joins Bold Founder, Caleb Parker, to talk about the changing demands for the office.

Tushar shares why the traditional office is dead using data to back up his claim, and explains how landlords should respond.

The discussion covers how remote work going mainstream has created a new type of demand for the hotelification of workspace, a potential new model of CRE management services that is similar to corporate travel agents, and why brand has never been more important in commercial real estate.

Connect with Tushar on Twitter: https://twitter.com/iamtoosh Connect with Caleb on Twitter: https://twitter.com/Caleb_Parker

If you have any questions or feedback on this episode, email [email protected]

Questions in this episode

1. First off, on your website you talk about Office Search Alchemy - what is that?
2. Tell us about HubbleHQ and some stats on the amount of space, average size and number of enquiries/transactions you facilitate on your platform
3. You harvest a lot of data. Can you share how you use the data and what you learn from it?
4. As Hubble helps companies find office space, how has it been these last few months?
5. What solutions are needed for a productive workforce?
6. A lot of people have talked about the death of the office. But other people in CRE are predicting post pandemic demand to remain the same, but with less density in office footprints. Do you think people will pay for the same amount of space for less people?
7. How would you define the post-covid office? What do you think the future office looks like?
8. Now that remote working is mainstream do you think we'll see a significant demand for daily, or even hourly bookings of work or meeting space?
9. Will CRE agents end up looking like travel management companies?
10. Columbia Property Trust, A Manhattan Landlord just took back control of a 155,000 sqft WeWork space. Are Landlords going to operate Space-as-a-Service themselves?

Value bombs

• The office as we know it is dead
• Over the last 2-4 years we've seen a shift in the market towards Space-as-a-Service
• Small businesses and large corporates who used to sign 5 year leases are now looking for managed solutions
• Average transaction size has gone from 3 people for 3 months to 20-30 people for 1 year
• Office search enquiries picked up 75% in May and June
• New demand is for a hybrid office solution
• Central HQ's are still in demand, but with a smaller footprint
• 70% of people love working from home, but also want an office of some sort
• 41% of people want a quiet place to do focused work outside of their home
• The office of the future is solutions based
• People need choice
• There's a difference between the "In-Covid" office and the "Post-Covid" office
• We're going to see the unbundling of the office, and the hotelification of workspace
• When landlords and operators are making expensive decisions on how to design spaces, analysing multiple data points can help identify customer demand
• Enquiry to transaction data and list price to deal price is important to understand what customers want and are willing to pay
• If landlords want control of the future they will need to embrace Space-as-a-Service
• So we'll see more landlords understand and respond to Space-as-a-Service as something that's going to become mainstream
• Flexibility is needed but service is imperative to protect building valuations
• With Space-as-a-Service, creating a predictable experience that comes with a brand is what keeps paying customers in a building, not long leases.
• Generic spaces lack brand loyalty, consistency and a network effect.
• Specific brands add layers of service, attract the right mix of customers, and create new revenue lines.
• Selecting the right brand solution adds tremendous value by delivering a predictable customer experience, making the building attractive, and increasing asset value.
• To manage risk, many landlords will outsource hospitality and management to experienced Space-as-a-Service operators

Resources

Hubble's 'Should we ditch the office?' Survey results :

https://hubblehq.com/should-we-ditch-the-office/survey-results

Blog on the consumerization of commercial real estate: https://calebparker.me/featured-posts/workspace-service-needs-global-distribution-system-gds/

About Tushar Agarwal

Tushar is Cofounder & CEO of HubbleHQ, the leading online marketplace for finding and renting office space in London for fast growing companies and flexspace operators and landlords.

Tushar studied Economics at LSE (The London School of Economics) and spent 2 years working in investment banking before launching HubbleHQ back in 2014. He was Amazon's Young Entrepreneur of the Year Finalist in 2019.

He has led Hubble's growth as they have gone on to raise £6.4 million over three rounds, from the likes JLL, Pi Labs run by famous PropTech investor Faisal Butt, Downing Ventures, Starwood Capital and Concrete.

Just to list a few of Hubble's accolades, they are Deloitte's 26th Fastest Growing Technology Company in the United Kingdom, Property Week's 'Proptech Innovator of the Year' 2019, and last year they were voted as one of the 'Best Places to Work in Property' for a second year running.

Sponsors Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co) Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast Apple | Spotify | Google | Stitcher | Podbean

Award winning Architect turned property developer, Martin Prince-Parrott from Blackswan Property, a Birmingham, England residential property developer, joins Bold Founder, Caleb Parker, to discuss the work from home (#WFH) movement and what it could mean for existing and emerging residential assets

The lines between work and life have long been blurred and now we're going to see a blurring of the lines between the workplace and the home.

Martin shares his insights into how the world of residential real estate is responding.

Get ready for a new hashtag, because Martin believes we're going to see the rise of #Resimercial - a Space-as-a-Service solution that's a blend of work and home where people join like a gym with the flexibility to move from city to city within the network and access with their mobile phone.

Connect with Martin on Twitter: https://twitter.com/MPrinParr Connect with Caleb on Twitter: https://twitter.com/Caleb_Parker

If you have any questions or feedback on this episode, email [email protected]

Value Bombs and tweetables

• Center of gravity in people's lives has shifted from work and central business districts to their homes.
• Generic office space providers and businesses must now compete with the already customised homes of workers
• In response residential must now accommodate work functions and expectations; space, light, connectivity
• Remote working is creating opportunities for co-living brands in residential real estate as people are placing more emphasis on selecting homes in which they can live and work comfortably
• Co-living is the purest manifestation of Space-as-a-Service in the residential real estate
• Commercial real estate developers can learn a lot from the residential and hospitality world as it shifts from product to service
• Brand is important in co-living as it is a proxy for value and experience
• The co-living model creates a network effect where customers can move across locations or cities and have the same customer experience, thereby extending the lifetime value of a customer
• Co-Living brands which listen to their members will be able to improve and refine each successive development by leveraging their customer feedback data, the process will be iterative
• Smart Residential developers will start to partner with Space-as-a-Service operators to manage amenities, such as workspaces, and build communities
• Some co-living brands will partner with Space-as-a-Service operators to manage the workspace component of the co-living stack
• We're going to see the rise of #Resimercial - a Space-as-a-Service solution where people join, much like a gym, and it's a blend of work and home with the flexibility to move from city to city, space to space within the eco-system and it will all be fully accessible via smart phones.

Resources and shout outs

Pivot Podcast https://podcasts.voxmedia.com/show/pivot

Antony Slumbers: https://twitter.com/antonyslumbers

Dror Poleg: https://twitter.com/drorpoleg

Alex Notay: https://twitter.com/aknotay

Deborah Cadman: https://twitter.com/cadman1deborah

About Martin Prince-Parrott, FRSA RIBA

Martin is an award-winning Architect and Design Manager for the innovative mixed-use Developer, Blackswan Property. After almost a decade in architectural practice Martin was driven into Property Development by the realisation that the seed of an amazing place is planted at the beginning of the development process, not the design process. Martin's education started in Sheffield, where he attained a BSc in Architecture & Sustainable Design before returning to the University of Nottingham to pursue his postgraduate. At Nottingham Martin's studies focused on sustainable development, data driven eco design, advanced timber construction and passivhaus skyscrapers. His design work earned him 2 design awards and a feature in the Architect's Journal. After graduation Martin returned to the West Midlands, joining award-winning firms like Glenn Howells Architects and Gensler. Martin's two biggest passions are healthy cities and inclusivity. In 2019 his work on large, innovative urban projects and advocacy for these ideas earned him local and national recognition. Locally he was chosen as a finalist for the prestigious, Birmingham Young Professional of Year Award and nationally he was recognised by PropertyWeek as a Trailblazer in the Residential development space. Additional Experience: Martin has served as Chair of the BPS (Birmingham Professional Services) Property & Infrastructure Committee, speaks at conferences and on panels about cities, is a visiting architecture tutor, volunteers as a Trustee of The National Youth Recorder Orchestra and is currently writing a book on how we can make cities healthier. His hope is that one day cities will be such joyful, accessible and healthy places that people will choose to raise their families there. Martin is a Chartered member of the RIBA, Fellow of the Royal Society of Arts, a member of the Association of Corporate Governance Professionals, a member of the ULI and BPS Birmingham Future.

Sponsors Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co) Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com) Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com) Subscribe to the #WorkBold Podcast Apple | Spotify | Google | Stitcher | Podbean

Forward thinking real estate developer, Jacob Loftus, who is Founder and CEO of London-based General Projects, joins Bold Founder, Caleb Parker to discuss how his company is reinventing assets to be customer focused and create long-term value.

Jacob tells the story behind repositioning a 150k sqft asset with Space-as-a-Service (SPaaS), then trading that asset for nearly £200M. He follows that up with his advice for investors who want SPaaS in their assets.

The two also have a chat about remote work and the role the office will play in the future, and whether social media should play a bigger role in commercial real estate.

Follow Jacob on Twitter: https://twitter.com/jacobloftus

Follow Caleb on Twitter: https://twitter.com/Caleb_Parker

If you have any questions or feedback on this episode, email [email protected]

Questions in this episode

1. Your Twitter bio says you design buildings for the "New Economy". What does this mean to you?
2. You have a focus on reinventing assets. Why not start from scratch?
3. You repositioned an asset with Space-as-a-Service, then traded it for £183M. Did having a Space-as-a-Service footprint in the building negatively affect building valuation?
4. Do you expect Space-as-a-Service to play a big part in your future developments?
5. Will you spin up a new business unit to operate the Space-as-a-Service, or partner with an operating brand?
6. General Projects is active on Tiwtter and Instagram, you're personally active on Twitter - do you think social media should play a bigger role in commercial real estate?

Value Bombs and Tweetables

• #CRE is now a customer focused business. We are no longer just providers of physical space if we want to stay competitive. We must also provide services and experience.
• Value is created through the development process, but long-term value is created after completion through curation of amenities and community.
• 50% of the global workforce are millennials
• In 5 years 75% of the global workforce will be millennials
• Commercial real estate needs to develop assets around the needs and wants of the end user
• There is an expectation for the workplace to be more engaging, experiential and service driven than the past
• Corporates are now focused on creating workplace environments to compete for talent
• There is no need for people to commute to office every day, but the office is important for companies to create culture
• Remote work is great, but as humans we are social creatures
• Repositioning assets versus building from scratch saves 50-60% of the carbon footprint
• A large Space-as-a-Service footprint did not negatively impact the valuation of a marque asset in central London
• Rent reviews should be phased out just like long-term leases.
• CRE needs a valuation methodology to recognise buildings which are operated as Space-as-a-Service as a core asset.
• Having hundreds of customers on flexible terms is less risky than having a few tenants on long leases...if you're good at customer service.

Resources

The Property Boom by Oliver Marriott

About Jacob Loftus

Jacob Loftus is Founder and CEO of General Projects, a design-led real estate developer that creates experiential and sustainable buildings, designed around the needs of the new economy. With a focus on the changing nature of the home and the workplace, General Projects collaborates with architects, designers, creatives and tech experts to deliver environments that inspire people and connect communities.

Since its inception in 2016, the business has led the reinvention of over 900,000 sq ft of real estate across London. Most notably this includes the reinvention of the iconic Grade-II listed One Poultry, transformed into the first Creative HQ in the heart of the City. Ongoing projects include; Technique, an 80,000 sq ft media-style office building in Clerkenwell built entirely from cross laminated timber; the reactivation of the former Woolworth's HQ on Marylebone Road; Storybox, a former MI5 bunker in Vauxhall being transformed into a new experiential leisure hub; Expressway, an SME workspace & industrial complex in Silvertown and most recently Twickenham Film Studios.

Prior to founding General Projects in 2016, Jacob spent 7 years at Resolution Property as Principal and subsequently Head of UK. Whilst at Resolution, Jacob acquired and developed over 1.5m sq ft of real estate. Jacob pioneered Resolution's push into design-led creative real estate, including leading the award winning development of Alphabeta in Shoreditch. Jacob holds an MSc in Real Estate from London Southbank University and a BA in International Relations from Boston.

Visit www.generalprojects.com.

Sponsors

Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co)

Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com)

Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com)

Subscribe to the #WorkBold Podcast

Apple | Spotify | Google | Stitcher | Podbean

Space-as-a-Service veteran Borislava Tzvetkova joins Bold Founder, Caleb Parker from Sofia, Bulgaria to chat about her experience supporting global corporates, and why brand matters in commercial real estate.

We learn why demand from global corporates for Space-as-a-Service has grown in recent years, policies for transitioning back to the office after lockdown, hybrid spaces, how a Netflix model supports flexible working and why brand matters, especially when it comes to building valuations.

Connect with Borislava on LinkedIn: https://www.linkedin.com/in/borislava-tzvetkova-1a9b308/

Connect with Caleb on LinkedIn:

https://www.linkedin.com/in/calebparker/

If you have any questions or feedback on this episode, email [email protected]

Value Bombs and tweetables

• Global corporates are outsourcing their real estate to Space-as-a-Service brands as a talent acquisition strategy.
• The home office cannot be a permanent solution for a global corporate office strategy, because not everyone can work from home.
• 86% of millennials want the best of both worlds: the choice to work remotely and in a fun office culture and inspiring workplace.
• Hybrid spaces are needed for hybrid work models.
• Space on-demand supports flexible working and reduces fixed costs.
• Companies are starting to provide Space-as-a-Service memberships to employees in their benefits package.
• Like the hotel industry, asset owners will partner with branded operators to attract the right mix of customers, add layers of service and create new revenue lines.
• Generic spaces lack brand loyalty, consistency and the network effect.
• We'll see building owners partner with specific brands to drive the right economics that meet the business plan of the asset.
• Selecting the right brand adds tremendous value by delivering a predictable customer experience, making the building attractive, and increasing asset value.

About Borislava (Bori) Tzvetkova

Bori is a flexible workspace expert and business consultant who recently helped launch a really cool coworking brand called THIS WAY in Sofia, Bulgaria.

Bori started in the Space-as-a-Service world in 2004 with premium serviced office brand The Executive Centre based in Hong Kong. She was General Manager for their operation in Sofia. In 2008 she became the Group General Manager at Sterling Serviced Offices (founded by British entrepreneur, Giles Blanchard) with expansions in Istanbul and Sofia, before launching their THIS WAY brand this year.

While still supporting the Sterling brand and their global corporate customers, she's now focused on their expansion plans for THIS WAY around Europe.

See THIS WAY on Office Snapshots: https://officesnapshots.com/2020/06/08/this-way-coworking-offices-sofia/

Sponsors

Fortune Favours the Bold

Bold helps commercial real estate create & manage flexible spaces to dream, create, share, and succeed in. Now part of NewFlex (www.workbold.co)

Future Proof Your Portfolio with NewFlex

NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com)

Launch Your Own Podcast

A Podcast Company is the leading podcast production company for brands, organizations, institutions, individuals, and entrepreneurs. Our team sets you up with the right equipment, training, and guidance to ensure you sound amazing. (https://www.apodcastcompany.com and www.podcastsyndicator.com)

Subscribe to the #WorkBold Podcast

Apple | Spotify | Google | Stitcher | Podbean