The Top 3 Biggest Trends Impacting Commercial Office
In partnership with NAR REACH, THE SIOR Tech Vision SERIES will unlock the driving forces and emerging trends impacting our industry. We will look into emerging technology trends and shifting industry dynamics to help our industry navigate the future of commercial real estate.
Technology is a phenomenon that has profound implications on the commercial real estate industry. Today's commercial real estate leaders need to prepare themselves for a new normal that will impact their business, their clients, and their organization.
The industry is in the midst of a once-in-a-generation shift. The pandemic has exacerbated a much-needed change in the industry, redefining operations for a new generation of technological advancement assets and processes, especially for office leasing professionals.
The rise of the endemic has now forced the industry to focus beyond safety and sanitation to improve occupancy. The past 12 months have intensified the need for technology solutions to address flexible work experiences, data intelligence, and automation of processes to safeguard the buildings and the office leasing profession.
Since 2010, venture capital investments in office technology have accelerated at breakneck speed. The industry has begun to see brokerages and commercial real estate organizations take action, adopt new technologies, and realize the financial and operational benefits.
According to data by the Center for Real Estate Technology & Innovation, since 2010, $5.7 billion has been invested in office technology companies, including flex-office solutions, tech-enabled leasing, and transaction management. Office technology might not sound exciting, but technology investors love it.
The speed at which the office technology industry is evolving only amplifies the need for new creative solutions in a global and digital economy. There is no better time to leverage innovative technology to transform your business.
Below are three (3) leading technologies that are innovating the industrial industry based on market trends and venture activity.
Emerging Sectors in Office Technology
1. Flexibility and the Future of the Office
Coworking and flexible-office is the fastest growing trend in the office industry. Since 2010, $21.4 billion in venture capital funding has been invested in coworking and flex-office companies.
The leading factor fueling the flex-office sector has not been lost on venture capitalists, who are interested in more than just how you work. They want to invest in where you work. However, funding only tells one side of the story. WeWork, the most recognized brand in coworking, has raised $20.6 billion in funding in a combination of debt and equity.
The industry has rapidly become recognized as the secret sauce for office owners and brokerages to attract and retain the new age of office tenants and once overlooked small to medium size technology companies. One such company, Industrious, recently received $200 million from CBRE for a 35% stake in the company, valuing Industrious at $600 million.
Owners are also getting into the coworking and flex-office act. Cove, an office and tenant experience company, partners with office owners and managers to realize the financial benefits of the flex-office movement, directly. The company has raised $8.4 million in total funding to help owners and landlord rep broker-managers attract and retain tenants. Several other companies receiving recent funding include: Zynq, Hubble, Habyt, FlyDesk, and Psquared.
2. Tech-Enabled Commercial Real Estate
Tech-enabled commercial real estate has been a growing trend in the office sector. The general lack of innovation in the conventional office sector has begun to receive significant attention from the venture capital community, fueling the next generation of tech-enabled services.
Since 2015, $250 million has been invested in the tech-enabled commercial real estate sector. Companies in this wide and diverse industry range from leasing and workplace strategy to security deposits and financial services.
Raise, a tech-enabled brokerage, has been making waves in the industry as it aims to empower real estate experts with innovative technology and deliver superior solutions to clients to reimagine their workplace. The company has raised $26.5 million in funding. Other companies to innovate the industry include: Otso, a financial alternative to security deposits for owners, brokers, and tenants, SquareFoot and TenantBase, tech-enabled brokerages and office marketplace, and Davinci Virtual, virtual office addresses and services company.
3. Software and the Future of the Office
Software and business intelligence solutions have become invaluable when it comes to transforming the commercial real estate industry and transactional real estate.
In a work-from-anywhere environment, business intelligence technology and solutions are being deployed by commercial real estate organizations to improve operational efficiencies and manage transactions. These cutting-edge technologies are allowing brokerages and managers to optimally manage transactions and teams more accurately.
Since 2010, technology investors have invested nearly $1.0 billion in software-based commercial real estate solutions.
VTS, for example, received $187.4 million in total funding from some of the largest technology investors and real estate organizations including, Blackstone, Brookfield, Tishman Speyer, Fifth Wall, and others. The company’s software brings together landlords, brokers, and tenants to make deals happen. Using business intelligence to manage office space, Eden Workplace, a workplace software solution for hybrid companies, offers a range of solutions from employee management to facility management. The company has raised $68 million in total funding from RXR, JLL Spark, Thor Equities, and others. Several other companies include: Robin, SpaceIQ, and Workframe (acquired by Newmark).
