The space-as-a-service (SPaaS) is bringing structural changes to the commercial real estate industry in the UAE. There has been a paradigm shift in the operations of commercial real estate with the introduction of SPaaS. Space-as-a-service has completely revolutionized the way the commercial real estate sector used to offer services to tenants and taken off a load of rent collection from commercial landlords by fully automating the process. This will certainly increase the focus of landlords on investing more time in improving the services.
Some of the live examples of the SPaaS model are co-living, co-working, and retail wherein the landlord offers a catalog of services to tenants which allows them to effectively utilize the space. It involves almost every service a tenant needs to live a comfortable lifestyle such as fixtures, digital connectivity, staffing for operating and managing services, and furniture. The best example of the success of space-as-a-service (SPaaS) in commercial office space is WeWork – the largest commercial real estate firm that offers shared workspaces to tech. and service startups, and other enterprises. WeWork has automated all necessary functions of the office such as space form and function, lease terms, etc., and has reshaped the process of operating office spaces similar to hotels. WeWork’s business model has encouraged landlords to follow the conventional methods of operating the office to implement it. They are now briskly competing for SPaaS enterprise tenants.
What is Space-as-a-service (SPaaS)?
Space-as-a-service refers to space which is purchased on demand for a specific duration. It also means the workplace procured to provide the desired space and services required to get the job done for every individual whenever required. Space-as-a-service is the need of every organization interested in attracting, retaining, and producing highly skilled employees.
SPaaS has a far-reaching effect on the commercial real estate sector. It can bring transformation to each aspect of the real estate model, right from asset ownership to monetization of access and services including physical space. The concept of SPaaS facilitates a change in management beliefs about the design and reshape the work culture to one which improves the productivity and experiences within a firm’s real estate portfolio.
Space-as-a-service is the result of a series of technology-enabled structural changes in the commercial real estate (CRE) marketplace. Technology is playing a pivotal role in revolutionizing the way the corporate sector operates and its employees work. High-speed connectivity has been the biggest growth driver in the rise of SPaaS. The proliferation of emerging technologies such as the Cloud, Artificial Intelligence (AI), IoT sensors has made it possible to connect almost everything to the internet. Robotics have completely changed the manner in which the corporate sector and its workforce occupy and use the space. Furthermore, the rising penetration of smartphones, laptops, and tablets have also been a catalyst in accelerating the pace of Space-as-a-service.
The Changing Landscape of Office Space Occupancy
The concept of traditional office space is being replaced by hub space, home office space, central headquarters, serviced office, client office space, and co-working office space. All these methods of occupying the office space are not mutually exclusive. Several UAE-based real-estate and property management firms are using all or most of these ways to occupy the office space based on their requirements.
Space-as-a-service is of paramount importance to the real estate sector. It allows them to maximize the utilization of the space and ensure leased and owned assets are effectively utilized and unused or underperforming assets are removed. SPaaS facilitates smart investment through effective execution of space acquisition, design, or lease updates. This has a positive impact on the net present value, return on investment (ROI), and overall business performance of the real estate firm.
Space-as-a-service also fosters the speed to market of the space through portfolio modifications to minimize disruptions and reap the benefits of smart strategy. It also reduces the liability of the real estate firm by facilitating the scientific designing of office facilities to protect the user’s health and safety.
Space-as-a-service is highly flexible to adapt to the rapidly changing business needs such as mergers & acquisitions and asset management to improve efficiency and business performance. Furthermore, SPaaS also facilitates easy maintenance of the premises through timely maintenance tasks of the large-scale building to extend the life of the space.
Top Reasons to Embrace SPaaS
Users of space are demanding the physical office space to be integrated with Space-as-a-service experience. The commercial real estate industry is looking for a unique combination of technology and data-driven services to create a smart and flexible work environment. SPaaS is laying the foundation of smart office space to allow users to define and promote their firm’s core values.
Transforming the Scope of Property Management
Space-as-a-service is playing an instrumental role in transforming the role of property management and the job profile of property managers. Earlier, property managers were only responsible for maintaining the physical premises, resolving the tenant’s requests about maintenance, enforcing lease provisions, collecting rents, and producing timely financial reports. However, with the introduction of the SPaaS model, in addition to the above-stated tasks, property managers have also become a custodian of office space experience and are responsible for taking care of interior decor, social events, daycare centers, and concierge services.Space-as-a-service is becoming an apple of the eye of the young generation as it offers them the flexibility to work out of shared space without being bothered about the lease or ownership.
Reducing the Cost of Operations
It has become a hard nut to crack for the real estate sector to curb the rising cost of operations. The companies are tightening their belts to curtail their operating cost. A Space-as-a-service business model is a ray of hope for the real estate sector in this mission as it allows them to work from shared office space based on their needs. Under this model, companies are not required to maintain an office at all times. They can use office space whenever the need arises.
Space-as-a-service allows real estate companies to operate on flexible terms. Shared space will provide even more flexibility to employees as they can work from the place of their choice. It also saves the time of the employees consumed in commuting which increases their productivity.
Owning an Office at Posh Location
Space-as-a-service has made it possible for small real estate companies to own or lease office space at posh locations as they share the high cost of office space with other companies. The shared space business gains crucial brownie points in this aspect. Furthermore, using sharing space facilitates the company to have a dynamic workplace where employees are not confined to a small space which fuels their creativity and responsibility. This is indeed a positive sign for the company’s growth. Space-as-a-service also maximises the space utilization and curtails the cost of operations.
With the advent of SPaaS, the fortunes of a commercial real estate owner in UAE are highly dependent on creating distinctive user experiences (UX). The landlords have to brainstorm on coming up with creative ways such as leveraging data analytics to understand the occupant’s requirements to attract them. The shared space model is tapping into the hidden potentials of real estate and facilitating the firms in designing solutions to meet the dynamic needs of the consumers. The research reveals that by 2030, more than 30% of the corporate portfolios will be in flexible workspaces. Rising urbanization and shrinking square footage are paving the way for the real estate sector that can lease out furnished spaces to cater to the needs of the tenants.
Following a Space-as-a-service model will foster the growth prospects of the real estate firms and allows them to make optimum utilization of the available space. Without a shadow of a doubt, SPaaS will grow at an exponential pace and will be embraced by almost every commercial real estate player.