What Comes After Co-Working To Commercial Real Estate?
As an entrepreneur, I spend a lot of time thinking about the future and how my business and industry will be impacted by trends that are only just beginning to surface. But here’s the thing about trying to predict the future: Even the smartest people get it all wrong, because they focus on the headlines while failing to truly understand what’s driving the trends and where they may lead us 5 or 10 years down the road. For instance, in the commercial real estate industry, 2017 was a significant year for the co-working segment. But I believe that there is an industry shift happening that most people are not seeing.
First, I want to first share an important lesson from a different industry: telecommunications. In November 2007, Forbes ran a cover story with the headline, “Nokia 1 Billion Customers — Can Anyone Catch the Cell Phone King?" Back then, Nokia was the dominant player in the market, producing nearly 50% of all mobile phones globally. Apple, scrappy and new to the phone market, had launched the first iPhone in June. The rest is history. Nokia wasn’t just “caught,” it was steamrolled by Apple. Even Steve Ballmer, Bill Gates’ Microsoft co-founder, didn’t see it coming, declaring that, “There’s no chance that the iPhone is going to get any significant market share.”
The massive transformation in the mobile telecommunications industry coincided with a shift in form factor — in design and how people interact with that design — that we tend to underplay or miss entirely. Apple beat Nokia with hardware and software design that spoke to needs and wants that customers didn’t even know they had. In the process, Apple transformed an industry. I believe the commercial real estate industry is currently going through a similar transformation.
Our economy is now driven more by innovation and information, less and less by manufacturing. And yet, the majority of our workplaces are modeled on the “old” economy assembly line, where workflow was linear and corporate structures were hierarchical. But the nature of work has changed, and our workforce has changed. Every day nearly 10,000 baby boomers retire. Their millennial children are currently the largest segment of the labor force and are predicted to comprise 75% of the workforce within the next decade. They’re digital natives who have little memory of life without mobile technology — they carry everything they need for work in their back pockets and their concept of work is no longer a physical place but an activity that, for better or worse, follows us everywhere 24/7/365. Old economy office buildings just don’t make sense anymore, and what doesn’t make sense gets disrupted.
For all knowledge workers, including millennials, the primary purpose of the office is no longer to provide a physical space that allows us to be in close proximity to our colleagues in order to get work done, because work can be done anywhere. Today, the office — better yet, let’s call it the workplace — plays a far more strategic role: CEOs must use it to attract, retain and inspire the best and the brightest talent. Talent is the customer and as the customer changes, the building must also change.
What does that look like? The very definition of occupancy is starting to change. The one-employee, one-desk office model will die, and the modern office will begin to feel more like a college campus, where employees use space according to the work that needs to be done: offices for heads-down work, collaborative spaces for brainstorming, conferences rooms for formal meetings, cafes to catch up on reading.
The future workplace policy will revolve around choice and flexibility. Big tech companies like Google and Apple are famous for their campus-like workplaces, but the model is also replicable within office buildings, where landlords can recreate Googleplex-like environments by building out amenity-rich spaces vertically instead — cafes, meeting spaces, classrooms, lounge areas, gyms — that are shared by all tenants, whether they are huge anchor tenants or small startup companies.
Orignially appered in Forbes