These days it seems like social media is everywhere you look (to those who disagree, perhaps you find yourself only looking at sand?). Last week's Realcomm conference in Las Vegas was no exception. Professionals from the corners of commercial, corporate, institutional and government real estate gathered in Sin City to... tweet! As we explored the latest and greatest in technology in the real estate industry, we didn't forget to use it! Here's a sampling of the recent overflow of trending tweets during the conference:
Startups are booming right now, and as an underserved market in the commercial real estate (CRE) space, there’s more competition now than ever for renting out smaller, more flexible office spaces. And while coworking spaces are the hot new thing, providing an attractive alternative to traditional offices, remote working is also becoming more standard for growing companies. Simply put, it’s getting easier for startups to dodge the long-term office lease.
What’s a property owner to do?
The good news is that more startups means more office demand, period. Even if early-stage companies are finding novel ways to avoid committing long-term to a space, the benefits of a private office haven’t changed. From recruitment to culture, there’s no doubt that finding the right commercial office space can have a far-reaching impact on a company’s operations. It’s a worthy investment.
For property owners, too, it’s worth investing in creating a good office space. Happy tenants are key to the commercial real estate business. If your space offers the flexibility, service, and amenities that tenants want, you’ll enjoy a lower turnover. If the tenant is particularly pleased, you might even earn a customer referral, and there’s no doubt that your startup tenant has plenty of startup friends.
And as any property owner or property manager knows, tenant satisfaction is everything. But one question remains:
Is working with startups worth it?
Five years isn’t a long time in the real estate world, but it can be a literal lifetime for a startup. If you bring a new company on board as a tenant, there’s no guarantee that they’ll become profitable or continue to receive funding. Meanwhile, competition with coworking spaces is fierce. Should property owners still get involved with tech startups when so many forces are working against them?
One way or the other, there’s money to be made in the tech boom. While you can’t stop a startup from crashing, you can do your due diligence and determine who the company’s investors are and how much runway they have. You can also work to improve your tenant relationships, with powerful Property Management tools like Building Engines, and make meetings a standard practice. In that sense, it’s no different from taking on any other tenant.
If you understand what the tenant wants, you’ll be able to maximize satisfaction and minimize turnover. Startup founders are as connected with their peers as any other business owners; relationships still matter. So how can property owners and their management teams improve their relationships with startup tenants?
More often than not, startups just want speed of service.
Bertram Rosenblatt, a real estate broker from the startup-targeted Vicus Partners, ranks “flexibility of lease terms” as one of the most important factors. Tech companies thrive on agile operations, and that philosophy has seeped from engineering and product into all aspects of business – including the spaces in which they operate. It’s no surprise, then, that government bureaucracy and legal paperwork are a startup’s antithesis.
Of course, every tenant wants the protection associated with paperwork. Some companies hire brokers and lawyers specifically as a second pair of eyes to look over the lease terms. Still, it’s a chore for most startups, and it detracts from their actual business.
It’s best if both parties meet in the middle. You can’t necessarily simplify the legal process of renting a space, but you can do your part to present paperwork in a non-demotivating way. Explaining the reasoning behind each step in an easy-to-understand digest makes the process less irritating, even if it’s still long.
Similarly, you can explain what services you’re offering tenants behind the scenes. The average tenant wouldn’t know the steps that go into effectively managing a property; they just see the end result. And in the end, service quality is all tenants really care about. Add process transparency and self-service tools into the mix, and you’ll end up with a happier tenant overall.
It’s also worth it to be transparent about how long the process takes, since many startup founders often underestimate it. Your prospective tenant could realize belatedly that they’ll have to wait months longer than expected, which gives them yet another reason to move back into the local WeWork or another short-term provider.
Be where they’re searching.
Keeping with the theme of user-friendliness, it’s helpful to insert yourself wherever startups search. If a company finds your listing in a dark corner of Craigslist with nothing but a “call for details” note, you’re going to be at the bottom of the priority list (if the number leads to a pre-recorded message, you’re probably off the list).
Startups begin their search the same way we begin everything: Google. Office listing platforms like Share Your Office are a good place to add your properties, because the searcher will have easy access to your photos and contact info. This applies to individual rooms and desks as well as full buildings.
You can also try partnering with companies that work directly with startups, like Digsy and Firstbase. Some of these companies are full-fledged brokerages while others simply help startups with their search. One way or another, you want to learn from them—get your property on their mind, and find out what they look for when they recommend a space to a client. Quality tenant service comes from building great tenant relationships, communicating service standards, and providing tenants with the tools they need to self-serve. So there’s real value in learning about your audience from companies that work with them.
Never forget that you have the option of subdividing a space as you see fit
If you own a large property that’s otherwise perfect, you might be losing deals just because it’s too big. Startups won’t necessarily contact a 20-person space and ask if it can be subdivided, especially if there are other options on the market. Offering a variety of sizes will give you valuable data on what sticks. You can also use portable walls to subdivide rooms into semi-private offices. Shared offices are especially popular in more expensive cities, where having an officemate is a worthwhile exchange for cheaper rent. They are also a popular option for the 34% of American workers who operate remotely.
Even though many of the media outlets love to talk about coworking and co-living as the future of work, there are plenty of companies that are looking for a more traditional office space, with a standardized lease length. More and more of these longer-term spaces are beginning to offer many of the benefits that shared spaces tout, and they may be a better fit for more established companies which need more space.
But it might be worth considering adding new coworking spaces to your portfolio, or converting unused space. So long as you’re still providing tenants (startup or not) with great amenities and excellent tenant service, it shouldn’t be hard to win the attention of new startups and grab a piece of that profitable pie.
About the Author
Stefan writes content for Share Your Office, a real estate tech startup that offers on-demand listings of offices, meeting rooms, and coworking spaces.