Photo courtesy of Ajay Suresh / CC-BY 2.0
Sharing economy models for business are reshaping the world today. They are also changing real estate development and land use. WeWork and Airbnb altered the way tenants look at property, the same way Uber and Lyft have upended the way passengers look at transportation. We describe them as models that focus on the managed sharing of underutilized assets, in ways that improve efficiency, sustainability and community.
After the 2019 implosion of WeWork’s IPO, many were willing to write off the sharing economy as a fad that’s now past its peak. To examine that thesis, in January 2020, the Urban Land Institute’s Boston/New England Young Leaders Group convened a panel of experts on coworking, coliving and co-making spaces. I had the privilege of moderating the ensuing discussion between Athena Moore of Autodesk, Justin Miller of Tishman Speyer, Samantha Randel of National Development and Stas Gayshan of the Cambridge Innovation Center. From that discussion, several key insights emerged about what, why and how sharing economy models continue to create value and institute change.
Leasing a Curated Community
Sharing economy models are about managed sharing, curation and community. Like the hospitality industry, these spaces involve intentional, involved and centralized management and allocate significant space to shared and heavily programmed amenities.
Careful forethought regarding what should be shared, and what should not, is a key value-add to users of sharing economy models. Successful projects incorporate careful consideration of how to optimize the design, operation, and programing of shared spaces for their users.
Sharing economy models are not yet a one-size-fits-all solution and some users will always demand ‘traditional’ space. Yet, sharing economy models are pushing the rest of the industry toward shorter-term, flexible and highly amenitized, plug-and-play options for prospective tenants of all kinds.
Anticipating and/or designing-out user pain points from the outset (such as cleaning in coliving models and privacy in coworking models) is what differentiates these businesses from traditional, non-shared competitors. For example, coliving operators are assuming responsibility for cleaning shared space, while coworking operators are erecting physical barriers to enable privacy between firms.
For users, a curated community is often the biggest value-add. This is evidenced by the trend of large firms relocating entire offices into coworking spaces in bids to cultivate, revive or maintain innovative and modern corporate cultures. For smaller firms or individuals, leasing space in a shared environment can offer all the benefits of effectively buying a pre-fabricated culture, usually one that the firm or individual aspires to emulate.
Different Tenants, Different Lease Terms
Sharing economy models enrich the quality of life in their host geographies and, in so doing, create value for all players in the vicinity.
Shared spaces add a new sub-use which attracts a different kind of tenant. This increases the net diversity of uses and users of the local community. Coliving buildings attract slightly different residents than traditional studio apartments, and, correspondingly, coworking spaces attract slightly different firms than traditional office leases. For example, coworking spaces often appeal to smaller, service-based firms without extensive administrative support, whereas larger firms with existing administrative infrastructure still tend to prefer space that is entirely their own.
Christopher Nolfi
The added diversity of tenants and users creates increased community vibrancy, which acts as a rising tide to drive asset values for all real estate in the vicinity. Makerspaces are one such example. They are often proxies for the presence of innovative and creative clusters. They add value to their neighborhood and validate for outsiders the innovative status of the community.
Sharing economy models have already changed the real estate industry by changing the expectations tenants have for the space they want to lease. Consider leasing: Prospective tenants for traditional living spaces are increasingly demanding amenities and perks more commonly associated with coworking spaces. Tenants now expect greater flexibility in lease terms, and shorter durations. Similarly, coliving tenants expect amenities more commonly associated with premium hospitality.
Sharing economy models are not yet a one-size-fits-all solution and some users will always demand ‘traditional’ space. Yet, sharing economy models are pushing the rest of the industry toward shorter-term, flexible and highly amenitized, plug-and-play options for prospective tenants of all kinds.
WeWork aside, sharing economy models are here to stay in Greater Boston and beyond. Whether we view them as a new sub-type of an existing asset class or as a new asset class altogether, the pace of innovation driving new models doesn’t appear to be slowing down any time soon.
Christopher Nolfi is a loan analyst at Walker & Dunlop and a member of ULI Boston/New England’s Young Leaders Group.
