Now, tech innovators are out to shake up the property market. And it is ripe for disruption, according to a survey of the world’s future business leaders by BusinessBecause. A number of MBA students surveyed cited shared spaces as the office of 2050, while 62% are willing to share their offices with others; 42% their homes.
The proliferation of online property portals like Rightmove, Zillow and Trulia have pushed real estate sales online, and the likes of eMoov and SpareRoom have long let people share homes through slick sites.
But a new wave of start-ups such as WeWork, ImpactHub and Club Workspace are now attempting to challenge the commercial property market — worth $13.6 trillion globally.
“The world of work is changing in a fundamental way,” says Richard Morris, UK CEO at Regus, the global co-working space provider, which is listed on the London Stock Exchange.
“New flexible working styles, in terms of where and when work is completed, are calling into question the very purpose of the office.”
Property tech start-ups raised a record $1.4 billion in 2014, according to Crunchbase, a site which tracks start-up investment, spurred somewhat by “proptech” accelerators such as Pi Labs and Spire Ventures. But the movement is nascent.
“When we went through our accelerator program two years ago, people didn’t even know what proptech was,” says Nicholas Russell, CEO of We Are Pop Up, an online marketplace for short-term retail property, who studied at Oxford University’s Saïd Business School.
Property advisers DTZ estimate that up to 8% of global office space is used for co-working. London is the top shared office destination, with more than 800 flexible offices, followed by New York, Berlin, Hong Kong and Shanghai.
Research from the City of London Corporation found that “agile” working — typically with flexible hours and shared desks — is fast becoming the norm in the UK capital.
London-based Hubble, for instance, runs a matching service for companies seeking small spaces on short-term, flexible contacts with firms looking to sublet.
What has prompted the growth of flexible and co-working? One clue is that more than one-quarter of flexible office tenants are tech companies, mostly start-ups, DTZ says.
“Co-working is ideal for start-ups and small companies because it offers a cost-effective workspace model,” says Regus’ Richard, in an interview with BusinessBecause.
“Co-working is a great way to expand your network of professional contacts, access invaluable advice and raise the profile of your business,” he says.
Yet it is not just small, entrepreneurial businesses taking co-working mainstream. Large corporations too are increasingly opting for flexible working spaces.
“The trends prompting the growth of co-working are also prompting changes to the traditional working styles of larger, corporate organizations,” says Toby Ogden, head of central London tenant representation at DTZ.
One example is Lloyds Banking Group, whose flexible working covers 20% of its UK office space and 18,000 employees. Bank of America Merrill Lynch, Deutsche Bank and Macquarie Group, too, have moved in this direction: the latter sees 55% of employees change their workspaces each day in Sydney.
Part of the motivation is price: flexible working, along with short leases, help to cut costs; Deutsche forecasts savings of up to 30%.
“In a world where you can have 10 employees one month but 30 in six months, leases don’t make sense,” says James Layfield, CEO of Central Working, a leading co-working office provider, pictured left.
Yet he says companies are seeking more than cost cuts. He believes co-working makes for a better working environment. “This is not just about the physical; it’s about the mental as well,” he says, adding: “Companies are looking for an environment that stimulates their team [and] helps them attract talent.”
The residential property sector too is braced for a digital rush in the future. At the heart of the transformation is the consumer: property tech companies are shifting the focus away from landlords.
Nitzan Yudan is the co-founder and chief executive of FlatClub, a short-term rentals site that he founded while studying at London Business School — he tested the idea on classmates.
“I had five flats when I sent one email. After two weeks we had 70 flats posted. The need was there,” he says.
Crowdfunding sites such as LendInvest and Crowdrise, both help borrowers raise cash for home purchases. Andrew Gardiner, CEO and founder of Property Moose, another crowdfunding platform, says his venture “completely democratizes” property investment.
Meanwhile, serviced property providers are helping to shake up the real estate market. BNP Paribas says such providers became the biggest leasers of new space in the City of London in 2014.
“Serviced apartments are expected to grow in popularity,” says James Swift, co-founder of Urban Stay, which offers temporary accommodation for workers in the City, who graduated from EDHEC Business School.
Instant, the office brokers, says new lettings for serviced office space have grown 10% year-over-year. London skyscrapers the Cheesegrater and the Shard, Europe’s tallest building, for instance both contain serviced office spaces.
In the battle for bricks, co-working has barely moved the needle: rampant demand saw commercial property investment soar to £40.5 billion in 2014 in the UK alone. But if the opinion of MBA students is anything to go by, the office of the future increasingly looks shared.