COMMENT Space-as-a-service, or SPaaS, has been heralded as the future of the office. With landlords looking to be seen as more than just traditional “rent collectors”, capitalising on the flex space market’s imminent return to pre-pandemic enquiry levels could well provide a viable route to sustained success. To do this, however, landlords contemplating the transition from traditional workspace to SPaaS should consider their options carefully.
Marketing their space as a service means providing a fully fitted-out workspace with everything the post-pandemic occupier could demand, from rapid, reliable digital connectivity to low-density communal space. So with a plethora of factors to consider, landlords should do their due diligence to ensure they optimise this opportunity to increase return on investment.
There are three main avenues open to landlords planning to pivot to serviced and/or flexible workspace: letting to operators, entering into joint ventures, and going it alone. While each has its own risks and rewards, the best option will invariably be one which is tailored on a case-by-case basis.
Leasing to operators
Entrusting their space to an experienced serviced office operator can help landlords unlock the full potential of their assets. As newcomers to the sector, traditional landlords may understandably struggle to know exactly what potential occupiers expect of their space, and this is where the expertise of seasoned SPaaS managers can be vital.
Similarly, operators who have been in the business a long time, and who have been successful, bring the added benefit of a recognisable brand which will instantly resonate with prospective tenants. Strong brand awareness is absolutely crucial for differentiating offerings in an increasingly crowded market, so an operator’s reputation for providing high-quality service is almost as important as the service itself.
So, once landlords decide on this approach, it’s just a case of sitting back, relaxing, and letting the experts do their stuff, right? Wrong. Choosing to lease to an operator is only the first step. Landlords should then do their market research to ensure they partner with the right operator. And that means finding one with a strong track record of success in managing similar kinds of serviced offices.
Management agreements
So, leaving it all to the experts may not suit the needs of all landlords. Fortunately, that’s only one of the routes they can take. Rather than simply leasing to an operator, landlords can partner with them in a joint venture, also known as a management agreement.
Joint ventures are proving increasingly popular in the current market, with landlords and operators working together to deliver the best possible product. A middle ground between leasing and going it alone, these arrangements are preferable for many first-time SPaaS landlords because they provide a manageable balance between total control and greater security.
Indeed, JVs enable landlords and operators to share the risks of their ventures, as well as pooling their expertise, in a more reciprocal way than leasing allows. One tenet holds true, though, and that is that choosing the right partner remains of paramount importance. Landlords should conduct thorough research into potential JV partners to find the one with whom they can dovetail most effectively.
Going solo
Finally, for landlords who decide that the right partner for them just isn’t on the market right now, managing and marketing their new SPaaS assets independently is another option worth considering. Perhaps the most daunting option for those still finding their feet in the sector, this approach nonetheless presents potential benefits which could tempt landlords to take the plunge.
Aside from the obvious advantage of being able to take home a full share of revenues, opting to go without a partnership with an experienced operator means landlords can put their own stamp on the reconfiguration of their space. Of course, market research will be all the more important to ensure that prices for services are established competitively, so even independent landlords cannot afford to think of their assets purely in isolation.
Placing offerings in their market content will also enable landlords to connect with potential occupiers who may be unfamiliar with their brand, at least as a provider of SPaaS. Landlords therefore have a real incentive to reimagine their brand as well as their space, as they take it upon themselves to differentiate their offerings.
What landlords weighing up their options can hopefully learn is that there is no one-size-fits-all solution, so the best approach is one which begins with thorough research. This could involve looking inwardly as well as at the market conditions, asking the question: What kind of offering do I want to provide? The answer will likely inform the decision on how to manage their space, whether they do so independently, in a JV, or by leasing to an operator. In the race to future-proof their space, careful consideration remains crucial.
Richard Morris is director at technologywithin
