on Dec 17, 2020
Outsource or Go It Alone? How to Enhance Property Management in the Work From Anywhere Economy
Written by Danny Fuchs and Kate Wittels
In recent years, leading office developers have leveraged a range of new business models and tech tools to meet demand for more dynamic and amenitized workplaces. In the incipient Work from Anywhere economy, cutting-edge property management will be more critical than ever to sustaining an office product that can compete with makeshift workplaces in homes, hotels, and so-called “third spaces.” The coffee machines and free lunches of yore will no longer cut it.
Moving forward, one of the key questions facing landlords will be whether to develop these services in-house or partner with specialized, third-party providers. In our view, there is no one-size-fits-all solution to this question. Variables such as portfolio size, business philosophy, and market niche will inform whether building owners decide to outsource or go it alone. That said, better understanding the universe of possibilities for property management in the remote work era will be crucial to making an informed decision.
On one end of the spectrum, several of the country’s marquee office developers have opted for building in-house services that replicate – and, in some cases, refine – the offerings that might otherwise be delivered by third parties. In 2018, Tishman Speyer, one of the world’s largest office landlords, launched its own coworking venture to compete with offerings by WeWork, Knotel, Industrious, and other coworking providers. Dubbed Studio, Tishman’s coworking product has since been rolled out at its office properties from Boston to LA and Frankfurt and London. Studio’s expansion has proceeded apace during the pandemic, in light of heightened demand for flexible lease terms and well-publicized business woes for WeWork and Knotel among others.
On the opposite end of the spectrum, other owners have opted to partner with a wide range of specialized providers to enhance the tenant experience – and, in some cases, to benefit from the third-party operator’s brand and customer base. The Ion, the first phase of a 16-acre innovation district being developed by Rice University in midtown Houston, is an excellent example of the partner-driven model, with Rice working with specialized firms for coworking facilities (Common Desk), entrepreneurial support (Capital Factory), and a maker lab (TX/RX). Microsoft’s announcement this week that it will move to the Ion is a testament to the project’s appeal in the face of the remote work paradigm.
Common, the co-living management startup (unrelated to Common Desk), is tapping into the expertise of office developers through a national competition to create a network of remote work hubs, described as “an innovative new live/work product for an emerging workforce.” Common frames the partnership as a win/win for office developers, who get to leverage Common’s strong track record in residential management, and for second- and third-tier cities, which may benefit from capturing a segment of the emerging WFA workforce.
Each of these represents a different approach to acquiring, deploying, and managing amenities to improve office building experiences in an increasingly competitive market. As firms consider whether to undertake these activities in-house or outsource them, it is also increasingly clear that complementing these new services with enhanced tenant experience technologies will further improve office owners’ offerings. Some are choosing to develop tech in-house. New York-based RXR Realty, for instance, has built out a range of tech tools through its internal innovation unit RXR Labs, including pioneering a new building management platform called RxWell during the pandemic; among other things, this software enables building owners to efficiently adhere to safety protocols, including social distancing, workforce rotations, and space capacity management. Others are turning to third party software-as-a-service companies, like the Boston-based startup HqO, which promises to “elevate physical office spaces with digital experiences,” a scope which appears to encompass everything from space programming and events to repairs and security. HqO has raised nearly $50 million to date – a level of investment in add-on technology that is far out of the reach of most office building developers or managers.
What may be most interesting about the tech platforms that enable enhanced tenant experiences, however, is not whether they are designed and built in-house or by third parties, but rather how building managers customize the solutions to differentiate their properties. If hundreds or thousands of office buildings in cities across the country adopt a handful of tenant experience platforms – as the venture capital behind the apps is predicting – this tech will quickly become table stakes, not a value-differentiator. Perhaps that is why HqO is making moves to build a “marketplace” feature for its platform, enabling landlords to identify additional technology and real estate vendors across a range of categories, from food delivery and fitness classes to shuttle tracking and security. It’s a bet designed to empower landlords by helping them find more, higher-quality third party vendors for tenant experience improvements, changing the calculus of going it alone or outsourcing these services.
Ultimately, many office landlords may opt for a combination of all three approaches, balancing in-house services and third-party operators with deployment of new technology solutions. The key will be creating a dynamic tenant experience that leverages the best aspects of the physical workplace and fosters the collaboration, camaraderie, and community-building that virtual work arrangements can never fully replicate – and to develop a distinctive mix of offerings that differentiates office buildings not only from other Work from Anywhere offerings, but also from one another.