6 Things CRE Leaders Need To Know About The Sharing Economy
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The age of the smartphone has given rise to the emergence of digital communities, shared information and social networking. At the tap of a screen, consumers can now share a ride, rent an office space or even get medical advice.
Welcome to the sharing economy.
From Uber to Airbnb, the proliferation of companies built around the sharing economy continues to grow. Worth $15B in 2015, PwC predicts that the sharing economy will reach $335B by 2025. The industry will continue to grow as companies look for more ways to bring convenience and cost-efficiency to consumers.
The growth of this industry has had a profound impact on commercial real estate. Owners and developers have had to redesign and reposition assets around the idea that more people want to share services and collaborate. Here are six things CRE leaders need to know about how the sharing economy will impact their businesses.
Want to learn more? Attend Bisnow's London Sharing Economy Phenomenon event on 30 October.
1. It has changed workplace behaviour
The office of the future will be shared. A growing number of companies are moving their operations into coworking and flexible office spaces, and London is leading the way as the global coworking capital. In 2017, central London saw 2.5M SF of shared-office leasing activity, a 190% increase from the previous year, Cushman & Wakefield reported.
Coworking spaces are valuable from a productivity perspective. Space-as-a-service companies like WeWork offer solutions for individual workers and freelancers to work more effectively in a social space. Coffee, snacks, internet service and utilities like air conditioning and heating come at a fixed monthly price, offering tenants a more economical alternative to working from home or renting their own office.
Working parents and pet owners can also participate in the sharing economy through services that help them manage their home life while they are at work. The sharing economy has given rise to a number of platforms and services that help working parents find a nanny or a dog-walker. Websites like Care.com provide parents with a database of qualified child care providers and tutors, while apps like Daily Nanny offer parents a glimpse into their child’s daily activities while they are at work.
2. It is turning retail on its head
The retail industry has long relied on the buying and selling of goods, but that is changing. Companies have started to build business models around people renting and borrowing products for short periods of time rather than purchasing them outright.
American retailer Rent the Runway is one company that has applied the sharing economy to the luxury clothing industry. People can visit one of five brick-and-mortar stores or shop online and choose from a rotating selection of clothing and accessories. Shoppers can rent an outfit for a specific event or period of time, and return it once they are finished. In the U.K., Girl Meets Dress has taken a similar approach, offering unlimited access to designer clothing and accessories for a monthly fee. This allows people to pay less money for more selection, and reduces waste by recycling goods for multiple uses.
The sharing economy has also given rise to the pop-up retail concept, a trend that offers rotating, short-term rentals to retailers. It can serve as an opportunity for an entrepreneur to experiment with a new retail idea, or test out a business in a new market. Platforms like Storefront and Appear Here allow retailers to search for pop-up spaces that meet their business needs.
The sharing economy has also started to influence how people shop for food and groceries. A new app Olio connects neighbours with one another and local shops when they want to get rid of surplus food. Platforms like this help connect communities and benefit the environment by reducing food waste.
Food-sharing functions differently than clothing exchange because a lot of food is perishable, and expires quickly, making delivery time-sensitive. Food-sharing also functions differently than other products because it does not get recycled. Unlike an article of clothing that can be reused, groceries only have the single use.
3. Governments are still figuring out how to handle sharing apps
In London, Uber has often clashed with the city, and was recently allowed to regain its taxi license after the company agreed to stricter regulations, including sharing traffic data.
In the United States, the New York City Council voted to freeze new for-hire vehicles for ride-sharing services like Uber and Lyft. The landmark decision was the first time a city in the U.S. put a cap on the expansion of these services.
While the decision in New York is seen as a victory for taxicab drivers and those who worry that the increase in e-hail companies has fueled congestion in urban centers, riders who depend on the services have criticised the ruling.
Ride-sharing is not alone in its confrontations with local governments. Airbnb has become increasingly regulated as cities crack down on short-term rental policies. Neighbours complain about noise and a flow of strangers while some experts have argued that Airbnb rentals disrupt the affordable housing market.
This push and pull between innovation and regulation will only worsen as more sharing apps become available. Rather than fight the flow of change, local governments need to adapt to changing human behaviours.
The rise of ride-sharing apps has also impacted office and multifamily assets. Uber and Lyft's increased popularity has encouraged office and multifamily developers to rethink the allocation of parking spaces. Many projects have been designed with fewer parking options, and some even feature ride-sharing pickup and drop-off zones.
4. It is transforming the lodging and hospitality industry
The sharing economy has also fueled travel habits. Peer-to-peer platforms like Airbnb offer an online marketplace where tourists and locals can connect. People with additional space in their house or flat can offer up space to visitors in exchange for a nightly fee. Airbnb, in addition to traditional bed and breakfasts, provides a more personalised alternative to hotels and resorts.
Hosts welcome guests into their home and can give them suggestions about what to see in the neighbourhood, or introduce them to a local dish. The company is now moving into development, building apartment blocks in partnership with developers specifically aimed at short-term lets.
Hostels, where people looking to travel on a budget can stay in a room with five or 10 people, also benefit from the sharing economy. This rent-a-bed model allows occupants to save money by staying in a room with other visitors. It also provides solo travelers an opportunity to meet one another. According to lodging marketplace Hostelworld, a London hostel can range from 10 to 40 pounds per person per night.
5. It is revolutionising the healthcare industry
The sharing economy is also starting to gain momentum in the healthcare sector.
Doctors have started to use apps to access office space. Clineeds is a startup that allows healthcare professionals to advertise and network with other doctors who have office space to rent. The startup has over 450 clinics listing space on its site, and over 4,000 doctors. Physicians have also started to use services like WhatsApp to share medical knowledge.
The availability of medical assistance, doctor check-ups and medication delivery via an app can allow older generations to better age in place. Just like their younger counterparts use their phones to do things like send out laundry and share rides to work, seniors can use these services to complete household tasks. Using apps for home care, transportation or even meal prep could cost less than the average monthly cost of assisted living.
Seniors are also starting to embrace home-sharing as a way to earn extra income in retirement, age in place and have nearby help should an emergency arise. Silvernest, a platform that matches seniors with roommates, argues that its platform offers an easier, safer and more secure way of finding a match for older homeowners than services like Airbnb or Craigslist.
For owners and operators of senior housing properties, the sharing economy could mean a decline in occupancy rates.
6. It is encouraging public-private partnerships
Trends surrounding the sharing economy are impacting the relationship between public and private entities in cities around the world. Several cities have taken a co-city approach, where resources are co-managed through contractual, public-private partnerships. Citizens, public authorities, businesses, organisations and institutions like museums and universities work together to solve problems, according to a World Economic Forum report.
These partners tackle issues from development and zoning to infrastructure and public policy. The co-city concept is currently being tested in 12 North American and European cities.
Similar concepts have also been implemented across Asia. In Seoul, South Korea, the “Sharing City Seoul” project has brought together members of the private and public sector to develop sharing models that meet the city’s needs. The program has introduced policies around carpooling, bike-sharing and clothing exchange.
Kamaishi City, Japan, is also using a public-private partnership to enhance the sharing economy. As one of the host cities for the 2019 Rugby World Cup, the city decided to work alongside private partners to position itself as a tourist destination. Kamaishi City signed an agreement with Airbnb to provide additional accommodations for visitors and offer English guidebooks for guests. The city has also partnered with private ride-sharing and cycle-sharing services to help tourists navigate the city during their stay and minimise road congestion.
Want to learn more about the sharing economy? Attend Bisnow's London Sharing Economy Phenomenon event on 30 October.