Sharing Economy: Why Blockchain Might Be Next Big Thing for Office Rental
Blockchain as it pertains to real estate, might be extraordinarily useful.
The shared workspace model is poised to transform the world of work, catering to current and future trends by creating flexible and adaptive office ecosystems. According to Jones Lang LaSalle, shared workspaces occupy 27 mln square feet of office space in the US alone, and the industry will continue to grow quickly over the next two to three years. WeWork, the largest coworking company, has more than 130 locations and nearly a $18 bln valuation. The industry is attracting the interest of big investors who see the potential and value and realize that investing in these types of projects will yield increasing returns and market capitalization for their businesses.
“New coworking spaces are opening all the time, and it’s accelerating,” confirms Dave Idell of Croissant, dubbed "the Uber of rentable desk space" by the New York Times. “More investment capital has been pouring into coworking spaces than ever before too, into companies like WeWork, Knotel, Industrious and The Wing.”
He notes that many other spaces are bootstrapped or subsidized from parent real estate firms and have extra inventory they are looking to monetize. “Either way, the end result is more flexible space for consumers,” he adds. “This even includes teams from large corporations such as KPMG and McKinsey, who are looking to give their employees a more flexible work environment.”
Amol Sarva, CEO and co-founder of Knotel, tells Cointelegraph that while the demand for coworking and other shared workspaces has grown along with interest from investors, there is a more significant change occurring. “Office leases are getting shorter and shorter while landlords, in competition for the best and brightest tenants, offer more and more lifestyle amenities in their buildings,” he explains. “Here at Knotel, we offer headquarters as a service because that’s where we see the future of the workplace heading.”
Radical shifts in the way we work
The need for such types of office setups is dictated by how work is done. Through an increasing focus on functionality, professionals have more freedom and flexibility in leading teams, delivering services, completing projects and relocating as their business needs change and new projects arise.
“From our perspective, the trend across the economy toward organizing our workforce as distributed teams who can work from anywhere, is increasing,” says Preston Pesek, CEO & co-founder of Spacious. “The traditional pattern of having a central office headquarters where everyone commutes to a single location is trending toward becoming a distributed, remote, cloud-based work environment that leverages mobile technology to allow employees to work from anywhere.” A significant benefit of coworking models is seen in the provision of distributed networks for small and large companies to scale their physical footprint up and down as needed, responding to a more mobile and agile workforce than before. As a result, the burdens and risks of leasing permanent, fixed spaces for years at a time are becoming less appealing.
As Dave Idell points out, the amount of freelancers and digital workers in the world is increasing rapidly. “More than ever, it's now super easy to start your own company and build it from the ground up using only a laptop,” he says. “Coworking spaces have the opportunity to give their members a sense of familiarity in a sometimes lonely occupation such as freelancing.”
There are more and more projects that prefer shared workspaces. They are easy to establish and flexible enough to be changed if the need arises. Then again, it is not just about getting access to office space, but also to a range of services. In addition, the community is an important variable which adds to the advantages offered by these types of workspace arrangements.
“The way we work has changed - people change jobs more frequently, technology is much more mobile, companies are getting smaller and facetime is less formalized. Coworking nicely aligns with these trends,” underlines Amol Sarva. “However, what many coworking spaces do not successfully address is that high-velocity businesses center around human interaction. They need physical space conducive to companies developing their own cultures and fostering creative collisions between people.”
What is important to note here, according to Sarva, is that at their best, workspaces allow for not just “creative collisions” between employees, but rather an entrepreneurial ecosystem where ideas can be shared and connections can be made. “If you’re running a startup, your ability to overcome setbacks and failure is much greater in the coworking space because you’re surrounded by similar people doing similar things,” agrees Adam Richards, project manager at Camden Collective. “We’ve got 500 people in our building, we all know what other companies work here, what skills they’ve got and how to get in touch with them. That’s really the benefit of coworking spaces, that the possibility of collaboration is there.”
Indeed, uniting professionals who come from various fields inside a common infrastructure naturally leads to cooperation, sharing knowledge and experience, new partnerships, an expansion of existing professional networks and the creation of new ones. Dmitry Faller, a researcher at the Russian Academy of Sciences and chairman of the board at Primalbase, emphasizes a re-orientation of demand in the office rental industry. Project teams are looking for more dynamic workspace arrangements which deliver high-quality services.
As new industries rise and mature, providers set up niche coworking spaces for various project categories. Apart from building infrastructure, coworking space providers establish and facilitate the development of professional communities.
Challenges & trends
It’s not clear yet whether the growth of the shared workspace model is sustainable and in what direction the industry is going to evolve. As industry experts reveal to us, there are a number of challenges that this type of business needs to address.
“Meeting the rent payments every month on a lease can be one of the biggest pain points for space,” shares Dave Idell. “Having to focus on revenue in lieu of building the community or the increasing quality of the physical space can be very difficult to deal with. But, you gotta do both! And it isn't easy.” His company, Croissant, doesn’t own any physical space, they partner with them so that presents its own challenges such as lining up a space for an event. “For the spaces, the novelty can wear off after you've already met certain people at the space,” he explains. “So it’s always a struggle to keep it fresh.”
According to Preston Pesek, the community is critical in that it serves the needs of individuals and companies who can leverage the coworking community to find resources. He also notes that for most companies, the capital required to lease and furnish a coworking space is a very high obstacle to overcome.
This month, the Knotel network hit 420,000 square feet of space - for them, it is important to expand their footprint with larger and more diverse spaces. “We’ve actually seen a very natural product-market fit when founders and CEOs learn about what we do,” Amol Sarva says to Cointelegraph. “The challenge ahead of us is to educate a broader audience about the degree of flexibility we can offer businesses by delivering and maintaining customized spaces for them as they grow.”
“I guess our business model is different from other coworking spaces providers,” points out Adam Richards. Collective is a registered charity supporting start-up businesses, providing subsidized coworking spaces and free creative tech courses. It’s run by CTU Community Project, the charitable arm of Camden Town Unlimited, the business improvement district for Camden Town. “At one end of the extreme, you’ve got WeWork, which is obviously a huge company in many countries and very commercially and profit driven. We don’t charge people for the space. For us, our business model is reliant upon getting into spaces for free. We target vacant or unused buildings or buildings that are going to be knocked down. In London, the land values are so high and the value of space is so high that it’s very difficult to get into those types of buildings - they just don’t exist. So, space is the biggest challenge for us.”
Can it be an interesting use case for Blockchain?
Blockchain technology is still in its infancy, and according to Dmitry Faller, the basis for a wider integration of Blockchain is laid down through simple and understandable solutions which are easy to set up and implement. “We have been seriously involved in the Blockchain industry for a few years and found it interesting to try to implement this technology in the commercial real estate industry, to give a technology access to the physical environment,” he says. “We started thinking about how to build a digital analog for community membership mechanisms and we believe that this is one of the cases where Blockchain technology is indeed useful.”
Dave Idell agrees that just like any other industry, adding Blockchain to the picture can create trust. Having more trust in the system helps with increasing the revenue from memberships or amenities. “As per Croissant, it is possible that we may add crypto payments in the future,” he reveals. “The idea of raising an ICO is also on the table, due to its ease of execution compared to the traditional, mind-numbingly tedious fundraising methods.”
“Blockchain, as it pertains to real estate, might be extraordinarily useful in establishing a reliable chain of title,” confirms Preston Pesek. “It has the potential to completely disrupt the title insurance industry.”
“I’ve actually been saying for a long time that Blockchain has interesting legal applications,” says Amol Sarva. “You could create a ledger for contracts, including leases, in this manner and even resolve disputes.”
It might take time and some examples of forward-thinking real estate firms leading the way to convince people in the industry and tech communities that Blockchain is a viable option.
“My colleagues say that applications of Blockchain technology are basically unlimited, but we still don’t see so many of those being production-ready,” reveals Dmitry Faller to Cointelegraph. “We would like to change it with Primalbase. We are not limiting our target group to technology projects - we see a huge interest from venture funds, financial technologies, marketing teams, R&D teams, social media professionals, but we would like to gather Blockchain talents under the same roof. We foresee a huge effect from it.”
From this perspective, Primalbase is an interesting Blockchain initiative leveraging Waves’ technology with a token that gives lifelong access to their shared office facilities - but, thanks to the features of Blockchain, it can also be traded or leased to other users. “It gives the same rights as in a traditional rental relationship, however, the mechanism is more transparent and logical,” explains Faller. “It allows simplifying rental relationship.”
In some countries, leasing a property to a third-party requires a license. Within a tokenized transaction, however, there is no such need. It’s a digital solution for all sorts of membership systems, which also simplifies the relationship between landlords, investors, managing companies and so on. This model is applicable to commercial real estate, workspaces and residential real estate. It could help to streamline rental relationships and find technological interpretation through a tokenization of ownership.
Blockchain protocol is often called a “trust protocol” for its ability to eliminate middlemen and to allow for direct, peer-to-peer transactions between people who do not necessarily need to trust each other. Faller says this particular technology will acquire new interpretation in the real estate industry.
Areas such as property rights, structures and the mechanisms of implementation of property rights come into play here. The real estate industry generates huge capital and can sometimes attract malicious parties. Blockchain potentially increases transparency, facilitates many processes, gives an additional level of trust to the various agents involved and makes the whole system more open, flexible and accessible.
“I am pro simple implementations, but let’s face it - Blockchain technology is promising, but it didn’t give us anything yet,” Faller concludes. “For sure, we are going to see interesting and production-ready solutions, but this is going to take time.”