What do WeWork, mobility providers, and outcome-driven technology tell us about the future of the office?
Just last week, CBRE announced a new offering, CBRE 360, which uses technology to personalize and optimize the workplace and deliver leading employee experiences.
According to CBRE:
“The services offered through CBRE 360 are powered by an industry-leading digital offering. Users will have the opportunity to experience seamless, single-point access to building amenities and services through CBRE’s proprietary mobile applications, which are built upon a secure, scalable, plug-and-play technology platform. The CBRE 360 mobile apps will allow users to locate colleagues and navigate the workplace, reserve workspaces, access food & beverage services as well as basic building and high-end concierge services, among many other activities.“
While one could view this as just another offering announcement, it’s should be considered in light of changes to the broader facility management landscape. Specifically, CBRE has hired an executive from Zipcar, which is one firm that offers mobility services extending beyond traditional car ownership. Moreover, the 360 offering is technology-enabled, though is not just a technology offering. It is becoming increasingly clear that while technology will play a key role in our facilities in the future, most building owners and operators do not want to purchase technology for the sake of having advanced software and services. The offerings need to be outcome-driven.
CBRE’s announcement is light on details, but follows a trend of CBRE making more foundational technology investments. First, the firm acquired ESI in 2015. ESI is a systems integrator with some key corporate clients, such as Kohl’s department stores. Then, CBRE acquired Floored in early 2017. Floored produces 3-D models of indoor spaces to help prospective tenants view a space prior to a visit. CBRE also acquired Mainstream Software, a facility management software offering, later in 2017.
It’s clear that CBRE recognizes that the facility management landscape is changing. These trends are becoming clearer by the day. For example, office space is becoming a key differentiator and talent attractor. Vendors managing that space must broaden their offerings from transactional services (such as custodial and equipment maintenance) to include workplace-centric solutions too. This includes delivery and operation of smart building technologies. A recent Dell and Intel study on smart offices and future workplaces found that many workers are dissatisfied with their workplaces, and millennials in particular may quit a job that offers substandard technology. JLL’s 2017 commercial real estate trends report cites two relevant drivers: (1) open innovation, and a need for the workplace to support such activities, and (2), human experience, with the office being “more than just a property”.
Similarly, there are new offering models, such as “workplace-as-a-service”, which includes a property lease, the traditional facility management offering, and a class-leading and occupant-centric workplace. These core features are sold in a bundled offering, available to small and large firms. WeWork is the prime example of workplace-as-a-service. Moreover, facility management historically is a low-margin business that can be at risk of commoditization. Firms like WeWork have avoided this commoditization by investing in a unique and differentiated offering, creating a strong brand, and cultivating a community that empowers occupants while supporting innovation. WeWork’s recent growth into corporate office space, called Powered by We, stands as a clear competitive threat to the traditional facility management players.
Even more disruption may be coming. Some suggest that the office could become a money maker rather than a cost-center in the future. Such a shift would change the role of the facility management firm and also require that these vendors broaden their offerings. Others have suggested that an Uber-like model may take hold in facilities management. I’ve written about how an increase in technology will create more operational jobs, though likely also will change the traditional facility management roles and responsibilities.
It’s not surprising that CBRE hired an executive from Zipcar to help the firm navigate this changing market. As traditional automakers have shifted to become mobility vendors, many of the changes in transportation may foreshadow facility management. Goldman Sachs recently released a report about mobility in the future, noting the advantages of an “on demand” and “pay-as-you-go” model. One key advantage of some of the newer workplace and facility offerings is their flexibility, or “on demand” nature.
Change is in store for traditional facility management. The offering is impacted by competitive pressures on both the high and low ends. On the low end, a number of tech-enabled firms are targeting retail and restaurant chains that seek to standardize their facility services while reducing costs, simplifying vendor relationships, and centralizing oversight and management. Technology-enabled facility management services can be delivered at a slightly lower cost and when aggregated across hundreds or thousands of sites, the savings adds up for the corporation. On the high-end, firms like WeWork could disintermediate the facility management vendors like CBRE. WeWork’s recent purchase of Lord and Taylor’s NYC Fifth Avenue store may indicate that the firm wants to become even more vertically integrated in the future.