Space as a service: Introducing real estate on-demand for tenants
The new buzzword is transforming commercial real estate
Real estate is no stranger to distinctive terms infiltrating the common lexicon of the industry. Often, these terms become so overused they tend to lose their meaning. For example, PropTech refers to anything that leverages technology to solve a real estate problem. One thing remains certain; these hot real estate buzzwords frequently gain widespread national, if not global, popularity, and fast.
The newest industry buzzword is shortened to SPaaS for brevity, but translates to “Space as a Service.” This buzzword references on-demand space that is real estate reimagined, or at the very least a thought-provoking new option that will ultimately benefit how we interact with physical space. What has been referred to as the “trillion-dollar hashtag,” SPaaS is invigorating the stagnant state of commercial real estate.
SPaaS is an innovative new offering changing the role of commercial landlords from rent collectors to service providers. To truly understand SPaaS, it is best to consider the lifecycle of commercial tenants.
SPaaS in business
For an entrepreneur, launching a new business is a bold leap. The early days require an enormous amount of time, effort and capital without any certainty the risk will pay off. During a business’ earliest stages, an entrepreneur will most likely opt to save money on an office space by choosing to work at home or from a coffee shop. As the business grows beyond the single entrepreneur, it will inevitably need more space. Traditionally, the next step is to engage a commercial broker to help search for space and facilitate the signing of a long-term lease.
This awkward jump from a free and flexible coffee shop to a 5-10-year lease with a personal guarantee is like transitioning from crawling to running, missing the walking phase. This is where co-working options enter the picture. Co-working companies come in and take on the long-term liability of owning or renting the space while curating a full-service, on-demand and flexible option for renters.
SPaaS in food experiences
Now consider a chef who wants to start his/her own restaurant. The first step may be to purchase a food truck or host dinners at friends’ homes. The only viable next step? You guessed it. It would be to connect with a tenant representative to find an available restaurant space and sign a restrictive and expensive long-term lease.
The SPaaS solution? Food halls, which are popping up in cities across the nation, serve as dynamic spaces with amenities, built-in collaboration and leveraged marketing resources. The unique space, flexible terms and placemaking garner a nice price-per-square foot premium.
Right now, large international companies like WeWork have flocked to SPaaS in the office sector but many local and regional groups are taking advantage of SPaaS’s increasing popularity in retail, restaurant, storage and more.
The community impact
On a local scale, the Denver community has seen promising success with SPaaS. Concepts like Dairy Block, Denver Central Market, Avanti F&B, Fetch Market and many others provide local tenants the opportunity to rent space with flexible terms and shared amenities. SPaaS creates accessibility for creatives, artists, chefs and entrepreneurs to enter the commercial real estate market.
Adding a new level of vibrancy to the city, these local spots can inspire other businesses to get in on the mix. By constantly introducing new retailers, artists and events, the space stays interesting, curious and alive with innovation. Just like an art gallery that showcases a different exhibit every six months, these projects are prime examples that short-term commercial real estate is a positive force in cities like Denver.
Who is SPaaS for?
As modern society continues to change and adapt for new generations, so will archaic industries. SPaaS is viable for all creators and entrepreneurs, as well as landlords. We will soon start seeing SPaaS everywhere. This is how customers want to use space, compelling property owners to meet customer demand where it is.
The future does not remove the final step of a commercial tenant’s journey. Long-term leases will always have a place in the market. However, the future introduces a necessary interim step, the SPaaS step. Although early in its maturation, this step will bring new life to brick and mortar locations that have been struggling. The innovation in SPaaS will be the catalyst we need to refill long-term tenants and reinvigorate future physical space.
Flexibility, experience, collaboration and shared resources are the answers. These trends are not going away. People want life on demand. Because of this, there will always be a company willing to take the long-term risk to provide a product to tenants looking to take their next step. The future of SPaaS is bright indeed.
Jason Shepherd is an investor, entrepreneur and community builder. For the past several years, he has been reimagining the role of property owners, galvanizing them to serve as hosts to connect community. Shepherd is co-founder of Atlas Real Estate, a wellness-based social club (Archipelago) and new marketplace technology (REACTIV).