Repurposing in Real Estate: Is It Happening?

In this episode, we will be discussing the concept of repurposing and how it can help you make better decisions about your real estate. Hear from experts, and see how it works.

White Space is shaping the future of work through an innovative and cost-effective sharing-space-across-time business model. Their flexible meeting spaces are proven to increase productivity, collaboration, and innovation.

White Space works with landlords worldwide to utilize underutilized office spaces to provide an amenity to tenants and a new revenue stream.

How China’s Business Equation can Be Advantageous to Startups

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Repurposing In Real Estate: Is It Happening?

With people using real estate in such a different way, what happens to the nature of real estate? Do you see a lot of repurposing going on where people are buying warehouses, hotels, or other facilities and industrial spaces? Where is all of this happening, and where is the opportunity for the hard asset investors out there who want to make money exploiting this trend?

I would say again, that’s the vision problems. I think that is what is going to have to happen. In these densely populated urban centers, the office market is shifting because of the trends that we talked about, and there are a lot of empty spaces. The asset owners are starting to catch on that maybe they need to do something more with the space than set it out and collect rents.

I think that they will have to cultivate what are the multiple uses of that space, and they have to put effort into what is the business environment that I want to create in this building. Therefore, they have to choose the operators who provide the services that make it a vibrant building. That’s why I put forward WhiteSpace on-demand collaboration space. It is going to be part of that cultivation because we are an attractor for office tenants.

There are several cases where tenants have signed into a building because there’s a meeting space there so that they can reconfigure their office design. They don’t need their own meeting room because downstairs is a WhiteSpace. We are providing an amenity for the building owner that helps them differentiate their building, and that’s going to be part of the trend. You are going to have to offer something more than here’s an office and the rent.

We invested in basking analytics which is workplace occupancy analytics. What we are seeing is Fortune 500 companies are asking what is going on. What space do we have? How are people using the space? Why are they using the space? How do we reconfigure the space? To get a sense of what is the ground truth of what’s going on, you need sensors in place, have analytics, see the times people are coming in, and then you need to think about why they come and how we make it better for them.? As you said, some people will choose to come in because of the meeting space and they won’t need such spaces, or there’ll be more amenities or whatever.

Being more intelligent is very interesting and exciting for real estate because people are now thinking this isn’t full quarters of a wall and space. This is a place where experiences happen and we need to make these places more dynamic. It’s a wonderful shift. It’s probably the greatest shift ever and it impacts all of us. If the average person is working eight hours a day, that’s half your waking hours.

Assuming you’re lucky enough to get eight hours of good sleep, that’s half your waking hours. You want to make sure that people are working in an environment, and startups discover it quite early on by offering a lot of amenities, WhiteSpace around you, and a place where you can thrive. People don’t thrive when they are in a cubicle. Some people do. Some modes of work do well like engineers prefer to be heads down.

There are times we need to brainstorm and be creative, and you need that. Where does the world go from here? Are offices going to exist in the way they do now? Are you shorting the office industry? Do you think office spaces are going to be converted or lie there vacant for a long time, maybe forever?

I wouldn’t write off the office yet. I don’t know if I’m ever going to see the end of the office. Further along in my career, I have seen these cycles come and go. For example, when I worked at IBM, it was 100% hot-desking or work from anywhere in 2000. I think it was about 2010 they did away with that, and they started requiring people to come into the office again.

You go through waves. Do you remember Yahoo notoriously called everyone back into the office and did work from home because it wasn’t working? It’s one of those endless cycles like centralizing and decentralizing in companies that there are advantages and disadvantages to both extremes, and so companies swing back and forth.

It’s a cliche to say, but the answer is hybrid. The answer in the future is sometimes we are going to go to the office, sometimes we are going to work remotely, and sometimes we are going to work in these third locations. We are going to use a network of different configurations and setups, including a collaboration space. That’s going to start becoming part of the conversation, and it’s going to be pick-and-choose depending on the type of work you need to do.

I also think it goes down to the culture of the company as well. A lot of it does flow from the founder, especially in the early stages. Some founders prefer remote. Others want people in the office so they can physically be there. The culture of the company is what will make this work or not work, but any change is going to impact the office industry, in my view, at least. The end of the office is a dramatic statement that even a 20% shift is fatal for many of the investors that own these office spaces.

Technology can and should be used to make people's lives better. It should help unleash people's creativity.

If you have such repurposing going on, and this is going on. This is why I live in Downtown San Francisco area, and so many offices are vacant here. Even when people are returning back, some offices will stay vacant. Even if you’ve got 20% less occupancy in a building, that is dramatic because of the fixed operating costs of running an office. People are now obviously rethinking what do they do with these spaces, but who knows where the future will go. We live in very exciting times. I’d certainly think about how the future of work is going to look.

We see that high vacancy rates. As I said, here in China, we have had COVID pretty much under control. I have been able to do indoor dining and all the activities. The cinema opened up. You wear masks when required, sometimes in shopping malls, certainly, in taxis, and on public transportation, but other than that, life is pretty normal. Shanghai has 25% vacancy rates in its commercial buildings. The future is going to look different.

The big message for asset owners is that the future is different. The building is a device, and you need to decide what software you are going to install on it. The software is operating companies that provide people with a service experience that will attract them to want to come to that space, whether it’s leisure, wellness, office, or collaboration space. No matter what it is, you are going to need that operations layer on top of the hardware in your building.

This is why I’m in PropTech. COVID accelerated trends that were already moving in a certain direction. We took a hard look at how we do things as an industry. I don’t mean the venture capital industry, but I mean the real estate industry. I wear many hats, and you have to treat the office, hotels, and senior care facilities differently, too.

Every asset class investors look at a real estate like a pair of shoes. Its spreadsheets, numbers, and commodity is an income-producing asset. That has changed forever. Now, you have to focus on the end-user experience. That’s the key to boosting your NOI, Net Operating Income, occupancy rates, or whatever it is.

Repurposing the space and thinking about what this real estate does and that will trickle into the residential sector, the type of home we all live in, and the world we experience. Technology offers a lot of great promise here. Technology hopefully makes the world a better place in our experience of these hard physical assets more customized and personalized.

IoT devices are doing this. When you walk in, the lighting can change or the music can play. The security can be armed or disarmed. You can make calls by merely asking. I won’t say Siri or Alexa in case my hunger is crazy now and I start calling people back. You could say, do this, do that, and everything was done for you. This is the future we are living in now. It’s not coming, but it is where we are now.

The future is going to be more of that, but the asset owners need to stop thinking about the asset as a thing and start thinking about it as an input into ultimately what people want to buy, which is the experience. I say that to my team all the time. I say the customer doesn’t want a room. The customer wants their event to go well.

Every middleman in real estate or every actor in the middle has to now suddenly realize they are going to skim margins and commissions everywhere. They have to focus on what value I am providing in this interaction. How do I do more for the consumer because that’s what matters now? Those quick, easy fees and the whole information asymmetry that exists in real estate where an agent will refer their favorite title company.

Lots of stuff happens, basically. Lots of dirty things happen in real estate, and that is now being exposed. I’d say times have been very good for a long time. There’s a saying in startup land where you’ve got to figure out, “Was this person a driver on the bus or a passenger on the bus?” When an industry is doing well, you can get away with a lot of things. When an industry is under struggle and change, then the weaknesses are exposed. The limelight is cast on those weaknesses and bad practices, and those must be changed. In the industry we are in and you’re in dealing with how people work, absolutely things have to change and are changing. People can’t get away with things anymore.

That’s what the exciting thing is. I’m a technology optimist. I believe that all this tech can and should be used to make people’s lives better, not just to skim off more rent. I’m interested in how we use the technology, the space, and the service. How do we put that all together to unleash people’s creativity? That’s why I believe in collaboration space because you can manage things through these kinds of remote interactions.

As I said, I have been working remotely since 2005. That’s a fine way to work if you are an individual contributor, but you can’t create remotely. Right now, the technology or state of VR is not there yet. If you want to have a creativity workshop, that means getting together face-to-face, and so we create the environment for that to happen with the space, tech, and service. All of those three go together into our product, and that’s what we are providing to our customers.

There's no reason why this culture is better or worse. They just are different. And you need to adapt and get used to that.

Barbara, tell me a bit about how China is different to Asia and how Asia and China are different to the US. I want to be careful here and say you can’t lump China into Asia. China is its own country and doing things. Walk us through how things are different there from the perspective of your industry, How people are working, and then how is that also different from the West. We have readers from everywhere, especially in Europe and the US. Even Europe and US are so different, not the differences radical when you compare the whole Asian region and China its own.

I appreciate what you said when you invested in going into China. You made that leap because I tell people that all the time when they say, “I’m thinking about entering China.” It is that radical step change. You don’t dip a toe in the water, or you don’t enter the China market. You have to commit and go for it because it is not like the West. At a basic human level, people are people. I have gotten used to living here. I speak Chinese. I manage my team in Chinese. It’s not an unbridgeable gap, but you can’t go into China thinking you are going to manage things the way that you do in the US.

When I first moved here in 2005, my husband and I would run into some cultural classes and we’d look at each other, and we’d go, “1.4 billion of them, 2 of us, the person who’s going to change in this equation is not that. It’s just math.” There’s no, this culture is better or this culture is worse. They are different, and you need to adapt and get used to them in the Chinese way.

Some of the things I can’t imagine ever going back, for example, the importance of a relationship here. Every culture in every country values relationships. It’s never wholly transactional or contracts. A relationship is important to everybody everywhere, but here, it is the foundation. Americans would come in, negotiate a contract, and then sign things, leave, and expect it to be worked out later. It’s not going to work. You have to build a relationship.

The experience of China as the negotiation begins after you sign the contract. It is how it is, and that’s the cultural way things are done.

We created these rules for China, and one of them is everything is negotiable. The follow-up is even things you thought had already been decided are still negotiable. The foundation is relationship. If you have a good relationship, then everything can be worked out, and as I said, it’s not better or worse. It’s a different way of looking at it. If I sign a contract and then the environment totally changes, that contract no longer works for me.

If you and I have a relationship and we are committed to having this business connection still work out in the long-term, then we do renegotiate the contract. The Western view would be the contract with contract. If you signed it, you have to live with it. If I can’t live with it, are you going to enforce the contract on me or are we going to continue to do business together? It’s a different way of thinking and it’s better. In the long-term, we are going to do business, and so we renegotiate what had already been signed.

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The Merits of Combining Technology With Office Space - https://www.youtube.com/watch?v=XeoTQKIIzT8

Offices vs. Working From Home - What does the future hold? - https://www.youtube.com/watch?v=LvFspY_q87k

How to Create a Powerful Workplace Culture That Brings Out the Best in Employees - https://www.youtube.com/watch?v=xWj0dFBgdRY

About Zain Jaffer

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as “Forbes 30 Under 30”, “Inc. Magazine’s 35 Under 35,” and the “SF Business Times Tech & Innovation Award.” He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.