ALPHAZIRKEL panel discussion on the digitization of the real estate and construction industry and the role of PropTech companies against the backdrop of increasing pressure on returns
On January 19, 2021, ALPHAZIRKEL, the platform for the exchange of knowledge and experience among family entrepreneurs, invited people to a discussion moderated by Albert Michael Geiger.
Participants in the virtual panel were Sandro M. Camilli (real estate economist and investor), Moritz Koppe (real estate economist and managing director of emproc), Anja Rath (Managing Partner Proptech1 Ventures) and ShareYourSpace founder and CEO Dr. Tobias Wagner.
Did you miss the discussion? You can find the recording at ALPHAZIRKEL. Questions and answers from the interview to read:
Albert Michael Geiger: The PropTech company ShareYourSpace is designed to make much better use of office properties. The need for long-term rental contracts in the office sector will probably decrease. The flexible use of office spaces is increasing - and by that I don't just mean coworking, but offices in general through much shorter use. How are you addressing the issue as a startup? Do you want to become a kind of AirBnB of the office market?
Tobias Wagner: Airbnb is indeed a reference model. What have we done? We have translated the sharing principle into the office world. The rise of coworking operators - WeWork, Design Offices, Mindspace, etc. - is a sign of the need for flexible solutions. Obvious and logical: companies, people, businesses and organizations are dynamic and have a need for flexible solutions. Flexible means, on the one hand, in terms of time: how long is a workspace or an office needed? On the other hand, in terms of size: how much office space is needed? Covid-19 is probably an accelerant. What has Covid-19 ultimately produced? Planning uncertainty! For years, we have only known upward trends in the real estate industry. That has changed: Hardly anyone today is in a position to say where the world is going over a longer period of time in a national, international and corporate context. So what is needed? Flexibility! It seems almost absurd to enter into a 10 or 20-year lease when you don't know what next summer will look like. This applies to both multinational corporations and small businesses.
Our digital marketplace ShareYourSpace went live at the end of 2019. On the one hand, the platform enables owners and tenants to offer their temporarily vacant existing space. On the other hand, all those who do not want to sign a long-term lease can book these workspaces.
We are talking about periods of between one hour and one year, i.e. the market for short-term rentals and lettings, which is complementary to the market for long-term bonds. Covid-19 is filling the supply side of the marketplace. Before the pandemic, it was often said that every space was occupied, even though the one billion square meters of office space in Germany was not fully utilized even then - because nobody needs a desk 24/7. The response to the request to provide the free space was comparatively low. That has changed with Covid-19. Suddenly everyone realizes that there is glaringly empty office space, especially because of home offices. On the supply side, we get space from corporates to those from the owner of a small office. What the sharing economy in the office sector is currently suffering from is the booking side. The uncertainty associated with unfamiliar spaces, unfamiliar third parties during lockdown times is a hindrance. Questions must be answered regarding safety and risk management: the pressing issue is health and hygiene in rooms, not only during the pandemic, but in general in the future. Albert Michael Geiger: The topic of benefit optimization. Tobias, your statement was: The supply is there, the demand is not yet at the same level. In these uncertain times, shouldn't demand also be increasing? If I don't want a 10-year contract, I have to look for an alternative, e.g. subletting office space from a tenant with a long-term commitment, right?
Tobias Wagner: Absolutely. My statement about bookings and demand referred to the time of the lockdown. At the moment, company headquarters are empty and people are sitting at home. The alternative, the third workspace, is currently difficult due to health concerns, restrictions on movement, and mandatory home offices. The world after Covid-19 will look different. When and how will new things prevail? For a very long time, things have only been going uphill, everyone has been earning well, low interest rates, inflation in real assets and a lack of alternative investments have brought little pressure for change. This pressure comes with crises in which property values and projects come under pressure - we remember the bursting of the New Economy bubble or Lehman Brothers. The solutions for the future lie in the area of technology. To do this, however, we need a change in behavior among the players, an open perspective, a "getting involved". This pressure and this compulsion come precisely at times like these. In crises, new models and new companies are baked into the cake. The topic of our virtual discussion is returns and property technology. Think of all the projects that are running out of budgets and time. This didn't just happen at Berlin Airport, it happens at every "doghouse". In addition, tech is gaining importance and attention with other training courses, with generational change, with digital natives. If innovation in the classic real estate industry is only ever reflected in tax models, then we will experience what happened to the automotive industry: Tesla suddenly in the fast lane. It would be good if we had the champions of tomorrow ourselves in this large German market. To do this, we need appropriate funding, an open ear from the real estate industry and a counterpart for the PropTechs. Then we can optimize returns - along the entire process.
Albert Michael Geiger: Proptechs and digitization are a long-term trend. A look into the "crystal ball": is the real estate industry well positioned in this regard in the German market? Where do you see yourself in 5 years?
Tobias Wagner: We have been talking about digitization in the real estate industry for 10 years. Covid-19 has led to digitization suddenly happening. In that respect, I am optimistic. The tech ecosystem is exploding: an incredible number of exciting solutions across the entire life cycle. The question is what funding will be made available. In this respect, Germany is practically non-existent compared to the Anglo-Saxons. That's a real shame. Many ideas do not have the necessary capital to succeed. When I look at the ShareYourSpace model, I am sure that Office as a Service will become a commodity - that is, an office wherever and whenever I need it, at attractive prices and in the right size. Just like we experienced with Airbnb in the hospitality industry. The technologies are there. We would be delighted if we became this marketplace in the office world.