As you know, Fifth Wall held a portfolio event a couple months ago in Venice. There were three panels held at their office, each covering a category Fifth Wall has made big bets on (the majority of panelists were from portfolio companies):

  1. Future of Cities
  2. Real Estate-as-a-Service
  3. Fintech and The Built World Economy

Today I wanted to share a few thoughts from the Real Estate as a Service panel (the entire panel is on the Fifth Wall podcast here). The context:

A look at disruptive platforms are reimagining the meaning of real estate as a “service” rather than an “asset”

Moderated by Cory Weinberg from The Information.

Panelists:

There is a massive trend of companies outsourcing their workplaces and Jamie discussed how Industrious capitalizes on this trend with coworking spaces. Business looks very different for different geographies in this space, which can prove challenging. For instance, operating space in St Louis compared to San Francisco or New York are two completely different scenarios. “Subscription for real estate” is Jamie’s long term dream, but not a current reality—their product is currently a C because it can’t serve every size tenant, and it will be that way for years. As a platform, it’s unfortunate to have to tell a tenant to go somewhere else once they’ve reached a certain stage. Referring to owning physical real estate, Jamie doesn’t believe it would be great for their business. They are experts at delivering the best work experience and owning the underlying real estate asset doesn’t bolster their moat from his perspective. The dream is “a 10,000 square foot Industrious”: smaller locations in more places. However, today 20,000-22,000 square feet is the starting point to include the space and amenities needed to successfully serve tenants.

Ari Mir talked about Clutter’s on demand physical storage platform operating  in seven markets, with aggressive expansion plans. They provide a full inventory management system online for customers to track their belongings. People can sell, or even rent, those items out. Down the line, you can even imagine borrowing against assets such as cars or boats. Owning its own industrial warehouses long term is an absolute goal for Clutter. With the continued growth of e-commerce, wants this leverage not just for their their own use, but also for others. A retail footprint within the cities they operate will likely be part of their business, both for the brand equity value as well as serving as a node in the supply chain.

A new category of accommodations, Creative Suites, will combine the spaciousness of an apartment, the amenities of a 4-star hotel, the productivity of your favorite work space, and the creative surroundings of an artistic studio. Lyric is in 10 markets now, and Joe Fraiman noted they plan to double that to 20. For landlords, Lyric mass leases blocks of rooms (entire floors), and handles end-to-end operations of those units. One thing they’ve improved upon by necessity was business development with large organizations. Early in the business, they learned quickly success meant selling to each stakeholder separately. It took a long time to understand the deal structure and parties needed. The transformational opportunity for Lyric is to lead the movement to a new middle ground of accommodations.

Like others on the various panels, a core part of Convene’s strategy is to address where technology and humans converge, and how we can make that better. Convene runs a workplace hospitality platform blending meeting spaces and workplaces—in each location, square footage is generally one third workspace, one third amenities, and one third event space. Ryan Simonetti, spoke about their focus on large (40,000 square foot and above) class A real estate assets in dense urban markets. While not being in every market is certainly a downside in terms of network and scale, there is immense power in focus. The future of work is flexibility, agility (for workforce as well as the company), and human experience, according to Ryan. Rather than own real estate, Ryan would rather influence design upfront as the anchor lead-in. Convene will open 24 locations next year, with many deployments being as an anchor tenant that a redevelopment is built around. He concluded by asking: How do you deliver an empathetic workplace and what does an operating system for a building from a human experience look like? Given empathy is what I believe the world needs more than anything else (which is why I’ve been working on Horizon), it’s no surprise I’m a fan of their approach.

Takeaway: With the continued rise of workplace, storage, and event space outsourcing, Real Estate as a Service is an evolving and fast-growing category of Built World companies with enormous potential. While the panelists were split on the importance of owning the underlying assets, they agreed upon the importance of the customer experience and creative flexibility. It’s a certainty that several category kings will emerge from the real estate-as-a-service theme.

For those who want to listen to the entire session:

Disclosure: Fifth Wall is a consulting client.