by @paulcarder
As we write about organizations (businesses, public bodies, or whatever) and their use of real estate assets and services (as ‘occupiers’ of the built environment) we are confronted with an apparent duality; two ‘different worlds’ perhaps. In fact, both occupier organizations and the commercial real estate sector are in the same physical world, of course. But they think differently. This duality is a human social (or business) construct – but, it must be taken seriously, or it will pervade until it is recognized and deconstructed by leaders on both ‘sides’. There should be no sides, but there are. The commercial real estate sector (CRE) would not exist without occupiers of its ‘products’ and consumers of its services. And most organizations need to be occupiers in order to deliver their work. It should be one world, but it is not.

Why are there two worlds?

One simple answer is ‘history’. Landowners had the power. Everyone else was a ‘tenant’. Organizations were no different – big organizations would get a better deal, perhaps, but they were still tenants. If you wanted a building to house your organization, you could rent it, but on the owner’s terms.

Another reason is that most of the people in the CRE sector were (and still are) trained to work for the ‘owner’, or Landlord. Very few are trained to understand the organizations that their ‘products’ are sold or leased to. On the other ‘side’, few of the people leading organizations have any knowledge of CRE practice.

Genuine differences

There are genuine differences, for understandable reasons.

Real estate prefers slow. Firstly, the investment cycle for a real estate asset is long. It was far easier to lock in a tenant for a long lease, and de-risk the investment.  Today’s shorter leases carry the risk of periods of unoccupied space – not good for the balance sheet.

Organizations must ‘flow’. Occupiers today, even government departments, are subject to rapid changes in their operating environment. They cannot commit to long leases. They have found new ways to occupy space, on more flexible terms. So, many have separated their long term ‘fixed’ occupation from the rest – which can be acquired on a short term basis.

But these are only ‘differences’ because the CRE sector has been slow to change.

Occupiers and the CRE sector need to create a ‘one world’ viewpoint 

Anyone who regularly reads Dr. Rob Harris’ research at Ramidus will have seen the trend towards short leases, flexible offices, and more recently the rise of innovative coworking ‘hubs’. Some CRE professionals and smart developers have immersed themselves in these new opportunities. But conversations we have held, and articles we read almost daily, suggest that a significant part of the CRE sector is still in ‘another world’. Their old, familiar world.

An example is the predominance of floor area in metrics (even worse, ‘square feet’). That immediately demands that the customer makes some kind of conversion into what that ‘actually means’ to their organization. How many people? To what extent are they ‘agile’? How will the space be used – shared? or one group? etc.

In the meantime, coworking is growing from small pioneer hubs into an enterprise-level service. Operators can lease space from the ‘old world’ CRE sector, and sell it on at a considerable premium. Not quite as simply as that – the best are not selling ‘space’ but rather a community, and additional services and benefits.

The CRE sector and occupiers need to create a ‘one world’ viewpoint, and educate each other. If not, particularly in the office sector, the CRE sector will become one step removed from the occupier (now customers …not tenants!). The new business operators at the interface between the occupier and the CRE sector will build their platforms, communities, brands. They will make the money, whereas the ‘basic space’ delivered by CRE will become a commodity (albeit, location and quality will still be factors).

This one-world viewpoint would be considerably enhanced by new Masters-level courses which teach both ‘sides’ and create common understanding. The profitable CRE business of tomorrow needs people who truly understand how organizations work, and how to create a service-business from real estate assets. And likewise, the occupiers of tomorrow need Corporate Workplace Directors who understand CRE, and how to get the best from their supply chain.

Refs:

Pickering, A. (2017). The ontological turn: Taking different worlds seriously. Social Analysis, 61(2), 134-150.