The Access/Sharing economy: Will real estate and construction be disrupted next?
No industry will be spared from the disruptive nature of access/sharing economy. From transportation to hospitality, entertainment and real estate, each sector must look within and be prepared to challenge existing business models, should they need to adapt to survive.
If you think the access/sharing economy model is a new concept, then you may be surprised to know that it’s not! Gym, libraries and even Roman baths are examples of what we now call the “access economy”. The rise of the internet and social media, soaring ownership costs, and post-financial crisis socio-economic changes, has fuelled the rapid spread of this phenomena into all economic sectors. No industry will be spared from the disruptive nature of access/sharing economy. From transportation to hospitality, entertainment and real estate, each sector must look within and be prepared to challenge existing business models, should they need to adapt to survive.
Commercial Property
Today’s workplaces are continuously evolving and a demand for flexible leases for occupants has become a trend amongst the office landscapes of major cities. The key driver to this fast rate of change is technology, and the need to make the workplace a positive environment for employees. The entrepreneurs and small businesses embracing technology to disrupt large corporate models need space to work, but ownership or rigid leasing models are often incompatible to their needs.
These trends have led to the steep rise in demand for co-working, hot-desking and agile offices over the last five years, evidenced in early 2018 by the crowning of WeWork; a co-working space provider, as central London’s biggest office occupier, ahead of some of the world’s largest corporations such as JP Morgan and Deutsche Bank. Existing players in the market such as British Land and International Workspace Group are riding the waves of change by launching their own co-working brands, property developers make last minute u-turns to their commercial projects, in favour of residential schemes.
The radical changes to traditional leasing and ownership models is not solely experienced by commercial real estate; WeWork has already begun rolling out their business model into retail (WeMRKT) and residential (WeLive) markets, and as of spring 2017 Airbnb valuation was more than top hotel chains, including the likes of Hilton and Hyatt. Hence, the access/sharing economy in real estate today is more evident than ever.
In the access economy model, a company owns assets and provide the crowd with access to the asset in return for one-off or ongoing membership fee. While in the sharing economy, the company connects suppliers with consumers directly in return for commission fee. These disruptive models in real estate are here to stay, and developers face the challenge of turning its threat into an opportunity.
The access/sharing economy will transform the way future buildings are designed. This requires the design of flexible spaces that could easily be converted for sharing purposes, and provide perks such as gyms, refreshments and networking zones. Turning existing and heritage listed assets into coworking/co-living friendly buildings with these features poses a great challenge, whilst the buildings of the future will be conceived as adaptable, dynamic kit-of-parts that can be easily re-configured as the number of tenants grows or contracts. Unlike buildings of today, future buildings will accommodate short term and long term tenancies from different industries all under one roof.
Already, architects and engineers are developing office concepts with areas of removable floor-slabs to enable inter-connecting floors over a weekend without any major works, or identifying materials that can be used to absorb the increased noise levels of co-working offices, due to their sociable/networking nature compared to traditional corporate offices.
Those involved in the design must allocate time and resources to overcome future challenges to remain at the forefront of the industry. Today, there are many technological enablers that will play a significant role in resolving the challenges facing the industry, for example:
- advanced building materials;
- pre-fabrication of building systems of-site;
- transformable structural systems;
- building information management (BIM);
- design or Manufacture;
- smart buildings and digital performance management;
- sustainable energy systems for buildings.
The UK Government provides various financial incentives to encourage companies in the UK to develop the science and technology that shapes the built environment we live and work in. Research and development (R&D) tax relief provides valuable funding for innovative activity. Obtaining relief for qualifying R&D costs generates a potentially substantial cash boost, providing a real incentive for undertaking further innovation.
More recently, the UK Government has made a big commitment to driving change in construction, through the issuing of grant funding as part of the Industrial Strategy Challenge Fund. The Transforming construction programme has allocated £170m of funding for innovation, primarily focused on investment of solutions to improve productivity, quality and performance of the UK construction sector. The funding is aimed at innovative projects relating to any of the core stages of the construction cycle; production, build and management.
Will the access and sharing economy reshape our buildings, neighbourhoods and cities forever? When everyone can choose where they live and work regardless of their income and social status, could socio-economic segregation in major cities become part of the past? Perhaps not completely, but the access and sharing economy will certainly introduce significant advancements to our buildings and cities, making it inevitable that key players in real estate must utilise the technology and funding available to be at the forefront of the access/sharing economy.
Authors: Conor Mansfield and Karim Budabuss
