Office Space As A Service: Industry Remaker Or Just A Rising Niche?

Office space as a service, which provides companies space on demand for as long as they need it and no longer, has some enthusiastic advocates. 

As technology and cloud computing allow businesses to grow in unpredictable ways, the argument goes, space-as-a-service flexibility will be critical. So critical that space as a service will disrupt the industry completely, becoming the future of office space, its advocates say.

But not everyone agrees this model is the be-all, end-all.

Convene CEO Ryan Simonetti — whose rapidly expanding company provides office space as a service — is an articulate advocate for the disruption he says the concept is causing the office space sector. 

"We're stretching out, first at bat, first inning," Simonetti recently told Bisnow. "I think real estate as an industry is being disrupted for the first time ever and technology will continue to change this industry and accelerate."

Not everyone is persuaded that office space as a service is going to completely remake the office space business in its own image. Rather, the concept could be on its way to becoming an important niche player, and possibly one with an important influence on how more conventional office space landlords do their business.

"What I'm seeing is that space as service is needed, and has a place in the industry," CA Ventures Principal John Dempsey said. "The question is, can it be everything to everybody?"

Dempsey is speaking at Bisnow's Chicago State of the Market Sept. 5, discussing space as a service, office development trends and other office hot topics.

Traditional office space is inefficient at handling short-term needs, Dempsey said.

"Longer-term leases don't always align with the needs of the business world. On the other hand, traditional office space for a longer lease provides stability and predictability, and allows a company to invest in a space that reflects its culture."

Space as a service is going to complement conventional office space, Dempsey said, not completely replace it.

"Say you have an engineering tenant who has short-term projects and who needs to expand for a while," Dempsey said. "Instead of going to the landlord for some temporary space, they can go elsewhere for the space they need. But they wouldn't want to put all their operations in that kind of space.

"Companies will still need space that they can call their own, where they can grow their own cultures. How can you create a consistent corporate culture in a completely shared office space environment?"

There is also a question about the space-as-a-service model that remains open, Dempsey said.

"What happens during the next recession, when demand slows down, and companies have to pull back?"

As space as a service rises as a model in the office space business, conventional developers and landlords are upping their game, essentially offering some of the same share-space features so that their conventional-space tenants can use them without leaving their current offices.

For instance, in Chicago The John Buck Co.'s 151 North Franklin offers a rooftop sky garden, a second-floor terrace and a four-story covered plaza to provide a variety of "third space" options for work beyond the desk, and McCaffery Interests' Twelve01West features two communal outdoor spaces for the same purpose.

By any definition, the Willis Tower is a conventional office building, but as its massive renovation continues, it too is beginning to offer elements of the space-as-a-service model to more conventional tenants.

Mag Mile Capital (the commercial mortgage and investment banking specialist known as Aries Conlon Capital until this week) moved from River North to the 84th floor of the Willis Tower. According to CEO Rushi Shah, the new common space offered by the building was an important factor in selecting permanent space there.

Mag Mile Capital needs standard office space — which is what it has on the 84th floor — but also uses conference space that it shares with other companies on an as-needed basis, Shah said, and he feels the Willis Tower now has some remarkable space for collaboration. 

"Why the Willis Tower? The building is undergoing a renovation, and part of that is two floors for the Altitude Lounge," Shah said. "It's an amazing place for meetings. Besides the building's strong location, that's important to our talent pool.

"The tower is doing a great job of making itself competitive, taking those floors out for amenities and common space," Shah said. "That's a major commitment. It works for us."

Want to see this in action? Don't miss Bisnow's Chicago State of the Market event Sept. 5 at 151 North Franklin.