Our Dysfunctional Relationship with Real Estate
Leasing and real estate structures are primed for disruption. The way that people buy and rent real estate hasn’t changed for hundreds of years: long-term leases, fixed rental costs and a structure of very low value exchange. Real estate, as currently structured, benefits the landlord not the customer and offers little to no relationship among parties. It doesn’t match the way the world now moves and it doesn’t align with current-day business culture.
Real estate structures have been designed to prioritise the landlord, or landowner, at the expense of the tenant. What we’re seeing in the coworking industry now is evidence of a broad dissatisfaction with our relationship with our physical environment. The customer has moved beyond an asset-focused mentality and the industry isn’t keeping pace because there is still mileage in old ideas. We need to look at relationships. We need to look at individuals and start bridging the divide between our physical environments and our ideological selves.
Community - A Demand for Relational Business
For years, real estate companies have made stable returns out of renting their office spaces, yet over those years they may never meet their customer (formerly known as a ‘tenant’). The customer works with an agent to find a property and sign the lease and then subsequently pays their rent each month to an anonymous entity. There’s no value-add, there’s no service, there is no human-touch and the customer just gains bare square footage - this is an incredibly commoditised transaction for such a large purchase.
Frankly, I think landlords have been making far too much money out of renting bare square footage for far too long and the new generation of customer frankly expects them to work harder for their cheque. People now want a relationship with their transaction; In a market on infinite choice, this is an anti-trend to the internet and globalisation. Products and services have been dehumanised to such an extent that people now want to buy a coffee from the independent little guy who remembers their order instead of from a big chain. In a world where so much is virtual and anonymous when people do meet they’d like to feel a connection and feel known.
When I ran my coworking business Collective Works, I became acutely aware that my members were spending more time each day with my team than they spent with their own families. There’s a real relationship that forms when you have that much contact and its one that you have to acknowledge; you can’t avoid it. As a coworking operator, I’ve learned about customers’ marriages, I’ve learned about divorces, I’ve learned about kids, about affairs, about victories and loss and also about some business deals. We were intimately involved in our members’ lives, along for the ride and there to support where we could.
It’s difficult to tell from the outside but running a coworking environment is more like running a hotel than it is running an office, in terms of how much of peoples’ lives we see - the difference is our guests stay for years not just the weekend. Perhaps you can see now why people are gravitating to a coworking experience instead of the one-sided relationship of leasing.
Half of the magic coworking is the physical space, but the other half is the community within that space. It’s very easy as an outsider to quickly size up how lovely an interior design or a physical environment is. It’s much harder to quickly size up the quality and value of a community that is being hosted there. Understanding the value of a community is understanding its value to you and to your business.
The way a business chooses to engage their customers is representative of how they view them. To commercial landlords you are a line on spreadsheet, you will hear from them if your rent is late, you cause damage and you might get a Christmas card - the relationship indicates they tolerate you, you have been granted permission to access their asset within some pretty narrow perimeters. Whereas a coworking space that looks after early-stage businesses, will welcome them with an introductory Coffee, invite them to attend knowledge-sharing workshops and make mentoring available for your team. One is focused on themselves and their asset, the other is focused on the customer. It’s totally different.