Commercial Landlords Will Play a Significant Role in the Future of Innovation
The rapidly changing business landscape, largely driven by advances in technology, has put a greater demand on companies to innovate. This is not limited to firms in the tech and creative sectors, but across all sectors. In order to stay competitive, business leaders are looking for opportunities to use technology to drive efficiencies in their current business model, as well as considering how technology may enable entirely new ways of operating.
This being said, innovating is a challenge, particularly for larger organisations whose employees operate behind ‘closed doors’, without regular exposure to what is happening and changing outside of their organisation or industry. And collaborating with others is where the inspiration for many of the best ideas come from.
There is also a cultural challenge to innovating in larger corporates – employees are typically focussed on their ‘day jobs’ and do not have the time, autonomy, or encouragement to think about new, or better ways of doing things. To address this, we have seen larger corporates forming innovation teams, which are specifically tasked with looking outwardly, and into the future, for inspiration and opportunities to innovate. To unshackle these teams from the incumbent corporate inertia, there is a growing trend for these teams to take space away from the ‘mothership’. Some have taken conventional leased space, others have chosen to set up teams in co-working spaces, but the key point is they are doing so away from the existing corporate portfolio.
In due course, I anticipate that we will see businesses address innovation in a more holistic way, and the responsibility for innovation will not sit separately with these innovation teams. The trend for outsourcing of non-core functions to contractors and freelancers, along with the adoption of technology and an increasing automation of tasks, will mean that the companies of the future will be smaller and leaner, and innovation will become a core function of the ‘mothership’. In this future of intrapreneurship, even more so than now, attracting and retaining talent, which is open-minded, creative and tech literate will be the ultimate driver of success.
Occupiers will value landlords that help to foster more innovative and collaborative environments. Landlords and developers will therefore need to adapt and embrace the workplace as an ‘idea factory’, as a core function of workplace experience they provide. There will be even more opportunity for landlords to develop strong brand reputations for providing market leading customer experiences. So where should we look for inspiration as to what makes market leading customer experience?
The coworking revolution provides some good cues
The proliferation of co-working space has been driven by a number of factors: a much greater demand for flexibility from young companies; a strong appetite for design-led spaces – not well catered for by the ‘old-school’ serviced office offering; but perhaps, most significantly, and under underappreciated, is the hospitality-focussed, collaborative and innovative culture that the modern co-working providers create for their members.
The better co-working providers are not just offering design-led spaces with flexible desks and seats. In addition, members benefit from a suite of softer services that help engage their members and foster innovation through a greater number of opportunities to meet, learn, collaborate and interact with fellow members. Some even bring funding-, mentorship- and collaboration-matching into the mix.
This is now driving a trend for ever-larger occupiers to take spaces in co-working environments. Many of these requirements would historically have taken up conventional leased space, but are attracted to these more modern, flexible workplace solutions, with this beneficial soft services layer on top. Put another way, the modern co-working provision is increasingly competing directly with conventional leased space, and although it’s often more expensive on paper, it’s a winning formula over conventional space because it’s still perceived as better value. After all, what price can ultimately be put on the next big, innovative idea?
So, how to respond?
More recently, we’ve seen landlords bringing conventional leased space to market with a greater focus on creating more attractive, design-led spaces with an improved technology/connectivity backbone, but in the main they have not offered much in the way of softer services to improve their customer experience.
The key opportunity for landlords and developers is to look beyond the physical space and towards providing a hospitality-focussed service, building innovation, community, collaboration and wellbeing into and around their buildings, taking cues from the successes of the co-working operators. Examples may include:
- Better hospitality and engagement with members
- Pro-active introductions to other members of the community
- Networking and learning events and activities
- Communal collaboration, classroom and presentation spaces offered as part of the amenity for the building
- Better engagement with local amenities through curated promotions, offers and perks
- Wellbeing as-a-service – mindfulness, yoga and meditation classes, gym sessions, massages, and/or childcare either onsite or nearby
Tenant engagement apps to tie this all together
It has been evident that over recent years occupiers are more footloose than ever, and will travel to the best product in the best locations. As mobility becomes more accepted and rental differentials across sub-markets reduce, service will become the new differentiator. In response, best in class landlords will necessarily build their reputation, brand and continued success on the back of providing a market leading user experience to their customers.
James Nicholson leads Knight Frank's Tech & Creative Team.