How technology is changing the real estate industry

Technology continues to be a catalyst for change in all areas of business and industry, and the real estate market is no exception. Today’s worker is more mobile and more connected than ever before, which means that businesses can operate anywhere. Especially in mature urban centres, the pushback against escalating real estate leasing and ownership costs is escalating.

While telecommuting may not be a viable option for all companies, or even all employees within a company, many organizations have utilized remote work models with great success. This is reducing the amount of office space needed to accommodate employees, and it is changing the dynamics of what constitutes an ideal - read expensive - location.

The distributed work model itself is not new. Health insurer Aetna has used remote work as an employee retention tool for more than 20 years, and more than 31% of the company’s employees telework. Through telecommuting, the company has reduced its office space by more than 2 million square feet, resulting in an approximate annual savings of $78 million. The company also closed and demolished its 1.3 million square foot building in Middletown, Connecticut, which was praised as the “office park of the future” when it was built in the 1980s.

So why all the buzz now? These are just a few ways technology-focused factors:

Working in concert with one another, the convergence of these factors and the ever-present pressure for companies to streamline costs, is making remote work viable for a wider array of knowledge workers than ever before. According to FlexJobs.com, 2014 saw a 26% increase in remote job postings over 2013. This directly translates to smaller footprints of traditional office space that companies need to lease, purchase, or build.

While companies like Aetna have made telecommuting a part of the company culture, other companies, like Yahoo! have shifted away from home-based work, bringing their employees back together. In 2013, when the company announced it would be ending work-at-home opportunities, then head of Human Resources, Jackie Reses said, “Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings.”

Therefore, companies are looking to innovative, flexible, and adaptable office designs to help inspire and facilitate these impromptu team meetings. Instead of floors full of cubicles, which often sit empty while meeting spaces are overbooked, shared workspaces, meeting spaces, social areas abound - often enabled with video conferencing, smartboards, and other virtual collaboration technologies. When GlaxoSmithKline relocated from their former location in a leased office space in downtown Philadelphia to the historic Navy Yard, the company used the principles of communities to create an open, vibrant and collaborative work experience. As a result, it was able to relocate the entire population of 1,300 employees from their former location in downtown Philadelphia while reducing their office space by 600,000 square feet. While the services provided have had numerous benefits for GlaxoSmithKline’s bottom line, the move also spiked the percentage of unleased space in the Philadelphia urban core.

Collaborative workplace organizations, such as WeWork and Workspring, are also knocking down the literal and figurative “walls” and changing commercial real estate dynamics. These shared office spaces provide various options for companies that either lack the capital or want to divest themselves of the real estate, furniture, services, etc. that were previously non-negotiable. These shared spaces are ideal for hosting meetings, as well as for both on-demand and long-term space for satellite employees, mobile workers, and independent professionals.

In addition to reducing the amount of office space a company needs, and re-imagining how that space is used, technology is also bringing down barriers between potential tenants and real estate owners. Developments in cloud computing combined with mobile and social media are resulting in cost-effective and real-time property information, which means many leasing activities are happening online.

As technology continues to develop and these trends gain more traction in the market, I foresee the following developments: