We assembled commercial real estate industry leaders on a panel to share insights on innovation that were equal parts expansive and deeply personal. For all of their different experiences, one central theme emerged from the conversation: Innovation differs dramatically from disruption, and understanding that distinction is critical as we move forward.
Learning From The Past
Recognizing innovation is often a matter of trial and error, best informed by past experience. While the advantages of flexible workspaces are now routinely accepted, Kevin Denahy, Global Head of Corporate Development/Executive Vice President for Brookfield shared how with a 24% ownership stake in Convene they encountered challenges as recently as four to five years ago.
“It was tough to get the New York crowd to embrace flexible workspace as an enhancement to the value of our buildings, so we opened our first four locations in Los Angeles.”
Brookfield used their early undertakings in flexible workspace to reinforce their search for future industry leaders.
“We want to identify all the new ways of doing things,” Denahy says, “…recognizing trends as either disruption to be avoided or as innovations to be embraced.”
Engaging Present Innovations
As consumers of commercial real estate (aka tenants) continue pushing boundaries, owners and operators looking to stay ahead must innovate on existing business models. At the heart of these new developments is a more dedicated focus on owner/tenant relationships. What was once a B2B business model has quickly transformed into B2C.
“Building owners and operators are beginning to have, and SHOULD have, a more direct relationship with the people IN the building.”
Those direct relationships have an immediate effect on the ways corporate structures use real estate as a financial instrument.
“The financial instrument is really being reimagined now as a consumer-based element to solve problems,” Kuntz explains. “The manner in which people think about individual assets versus portfolios is going to adjust.”
The Customer is also Evolving.
Understanding customer evolutions and going beyond innovative business models is crucial to remaining on the cutting edge of change in commercial real estate. As customers demand greater flexibility, the outsourcing of services such as office is changing the very nature of commercial real estate for owners and operators.
“Companies are eventually going to hand off the delivery of their employees' workplace experience to a third-party provider.”
This is going to have dramatic effects on typical leasing, while simultaneously offering new opportunities to innovate on the property ownership model - models that customers already demand.
“The appropriate relationship between an asset owner and an operator like [Industrious],” Hodari declares, “is a partnership for management structure and not an arms-length lease.”
Seeing The Future, Now!
If commercial real estate possesses anything resembling a crystal ball, it might well look like a data technology collection platform. Integrations of various technologies have already been embraced by various companies, but how and why they’ve become recent staples in the real estate industry are still commonly misunderstood. Sarah Pontius, Global Head of Real Estate Partnerships for WeWork, shares her insight into the increasing need for data appreciation.
“It’s really important that all of this data is not only collected but that it’s used. That’s where a lot of companies get stuck.”
Pontius advocates for spending time and resources to collaborate with computer programmers and data scientists to bring their business to the next level. “Anyone in the real estate industry knows,” reflects Pontius, “that it’s really hard to change things that have been done a certain way for a long time. In looking at where [WeWork] wants to be in the future, it’s a team effort to implement change that our industry so desperately needs.”
Future success for commercial real estate owners will be built on innovation and continuous improvement. Flexibility and learning to rely upon data insights for effective decision-making will be the competitive differentiator between those who maintain their positions, as opposed to those who continue to drive change across our industry.