CREJ - Office Properties Quarterly - September 2016
One of the biggest challenges facing tenants looking for space in the commercial real estate market today isn’t a new one. Real estate is static, and businesses are dynamic. If you hear any discussions about how the commercial real estate industry is planning for the future, it’s likely in reference to things such as smart buildings and leasing data platforms – all tools that will benefit landlords and brokers. The number of technologies and services out there now designed to help landlords manage their properties more efficiently and increase margins is increasing rapidly. What you don’t hear too much talk about, however, are ways that landlords and brokers can better serve their customers. For companies swept up in the volatility of today’s market, it’s difficult to plan and anticipate growth. The commercial real estate industry forces its best and new customers to make those exact bets, simply because that’s how business has always been done. Companies such as Uber and DropBox are showing us that if consumers demand on-demand, flexible services that fit their needs, then that is just what they will get. In short, “that’s how we’ve always done business” just isn’t a good enough reason anymore. So, how can brokers, landlords and property managers easily address this mismatch? To start, they can focus on adding flexibility to the existing static infrastructure. This means partnering with service providers that inject flexibility into the otherwise static industry. This was the driving force behind the creation of services that give brokers and landlords an additive option that can exist within the existing commercial real estate process, while providing the flexibility that businesses now are demanding. In contrast to subleasing, these services are designed from the business owner’s perspective as a simple way to offset the risk and cost of excess office space until it’s needed. The platform can handle everything from matching hosts (leaseholders that have extra space) with the right guests (companies that need some space for now), to managing the payments, communication and documents. No one has to demise space, worry about credit risk or commit to a long-term agreement that might backfire for either side. Brokers can let their consciences rest easy knowing that clients can sign appropriate leases based on their growth plans and offset that risk until they can fully utilize the square footage. And unlike a sublease, whenever the leaseholder needs that space back, he gets it. Customers are asked to commit to 30 days. Landlords also can rest assured that their tenants will have the financial means necessary to pay rent for the duration of their lease, while incubating their next class of up-and-coming tenants, many of which may go on to sign leases in the same building they started out in as guest companies. Here’s an example of how this often plays out. When Boulder-based advertising and marketing agency Amplio Digital started looking for a lease in downtown Boulder, it was a 12-person team, but the company’s growth projections put it at a 65-person company in three years. Amplio Digital knew there was no way the 1,000-square-foot office spaces the CEO was looking at could support that kind of growth. So, to avoid making multiple moves, the company decided to go bigger and signed a lease on an office three times larger than what it needed at the time. Despite making a big bet, Amplio Digital felt confident knowing it could monetize the empty space until the team grew. Amplio Digital booked two guest companies to occupy the excess space and started earning more than $1,000 monthly on the space. But, most importantly, it ended up with a lease that was right for its growth plans. “PivotDesk helped me relieve a lot of the fear associated with signing up for a bigger space – if I get in over my head, I can negate a lot of that responsibility with PivotDesk,” said Marshall Hayes, president and founder of Amplio Digital. Sitting across the table from a potential leaseholder and asking him to make a five- or 10-year bet on his business, when he often has a difficult time predicting how big the business is going to be during that time, a broker can easily see the stress on his client’s faces. That’s the bet the commercial real estate industry asks clients to make every day. But new solutions provide a way to offset that long-term risk and the associated stress by making it easier to plan for growth and sign the best lease for both the business and the landlord.