Business owners will also open offices closer to where their employers are, which will allow people to have a home base and be close to the mother ship. Those who embrace the diverse workforce environment will win, there’s no going back to normal.
By Taj Adhav
The Covid-19 crisis accelerated what was already a long-term decline in the need for brick-and-mortar retail space, but it also wrought havoc on the office space market, as companies emptied out cubicles and sent workers home to reduce the spread of the virus. With commercial real estate vacancies on the rise, landlords and tenants found themselves at odds about lease agreements, rent payments, insurance and other devil-in-the-details matters.
The coronavirus pandemic could have made 2020 a terrible year for a startup focused on disrupting the way commercial real estate leases are managed. But instead, the opposite happened. Leasecake, secured a $3 million in seed funding in February 2021. Demand for our business-transformation tool has been on the rise over the past year, leading to strong month-over-month growth in annual recurring revenue. That revenue growth combined with new franchise brands and corporate office tenants impressed our investors.
When landlords, tenants and brokers try to manage commercial real estate leases for more than one location, it’s challenging to keep track of rent increases, expirations and critical lease clauses. It’s transformative, when they realize they can have an entire back office in their pocket! By way of background, Leasecake is a SaaS application designed to be the sole source of truth for all lease and location information. Customers include Starbucks, Massage Envy, Jiffy Lube, among others, who rely on Leasecake to provide proactive notifications for all mission-critical, time-sensitive events. The app also not only simplifies collaboration across distributed teams, but helps multi-location operators save time, minimize risk, and better manage their growth.
Leasecake manages thousands of leases and millions of square feet of office space via its tech platform and is regularly in touch with tenant users, landlords and brokers from retail, office and industrial on market trends.
Smart companies are going to continue to get creative with more efficient ways to use space. Look at the technology companies that are investing in office buildings and using space more dynamically. Also, on the industrial side, there are logistic services leasing raw land for parking because they need space to serve the “last mile”.
Business owners will also open offices closer to where their employers are, which will allow people to have a home base and be close to the mother ship. Those who embrace the diverse workforce environment will win, there’s no going back to normal. It’s not going to be the collapse of commercial real estate by any stretch – it will continue to evolve as the market gets smarter.
Expect more broker activity. Renegotiating will continue to happen, it’s a good thing for tenants to look at opportunities. Teams will continue to be distributed, so there will still be some needed organization to understand who the landlord is, what are the terms of the lease, etc. Tenants will continue to use opportunities to comb through their leases and use estoppels to clarify terms. There’s an opportunity for technology to help change the power balance and better arm tenants. The strong get stronger and the weak ones don’t want to be left behind – smart software helps them adapt and thrive.
There will be new gen markets outside of traditional major metros. Also, employees will drive the return to the office. Young professionals making their mark, need to be seen and recognized. We’re seeing that already with Zoom fatigue, relentless meetings, and not being able to disconnect and socialize. There will also be more organic collaboration. Look at large tech companies investing in office campuses, and distributed offices.
There are several opportunities in the CRE market for commercial offices that were not there before. Vacancies in high-traffic areas make this the perfect time for commercial owners who are looking to expand.
There will be dynamic occupancy planning and hybrid work environments. Certainly, some markets hurt more than most, but blend and extend, renegotiations will take place, also more subleasing.
There’s still no clarity fully on what to expect given the glut of space and consistent repurposing, as to when the market will equalize. However, there are opportunities if you’re growing and want to capitalize on the new workspace environment. There is still a tremendous amount of uncertainty but despite the pandemic, numerous investors continued to be involved in the market and betting on creative growth. It’s exciting to be part of that!
Taj Adhav is CEO and Co-founder of Prop-Tech company, Leasecake, an Orlando, Florida-based, commercial real estate operating system for location management that is transforming lease and location management for Tenants, Landlords and Brokers responsible for managing multiple locations.