When you hear the word agile, what first comes to mind? Is it an engineering team quickly working toward the end of their sprint? Or do you think of it more broadly, in the sense of how efficiently a company operates?
The term is used a lot in business-speak, but not consistently, which only adds to the confusion. Throw real estate into the mix and it only gets murkier. Let’s clear up where agile came from, what it means today, and how real estate leaders are putting it into practice.
What is agile real estate?
Agile real estate is real estate that allows businesses to adapt their portfolio as needed for the health and growth of their business while decreasing up-front capital investment and reducing real estate risk. Being agile in real estate means avoiding being tied down to a physical space that drains money and resources, leaving your company wishing they hadn’t signed that 15-year lease. It means opening offices globally and where talent pools reside, attracting the best employees possible, faster than the competition. In this way, embracing an agile real estate portfolio can actually affect your company’s bottom line.
The origin of the term agile
If you first associate the term agile with software development, your instincts are right. Agile was originally created as a set of values and principles that allows those software teams to work quickly and iterate as they go. Through adaptive planning, evolutionary growth, early delivery, and improving on a continual basis, the principles of agile encourage a fast and flexible response to change.
Today, businesses need to operate in a similar manner. They must adapt and evolve (be agile) to stay competitive—and real estate plays a key role in that. Think about it: The cost of sourcing and obtaining real estate is a company’s largest expense, second only to payroll, making every decision (literally) count. In the past, a bad office space decision could follow a company for years, sometimes decades, into the future. But with agile real estate, companies can feel freer to pivot, move, and adapt their portfolio well into the future.
The three big benefits of agile real estate
There are three primary ways that businesses benefit from agile real estate: financial flexibility, workspace flexibility, and spatial efficiency. WeWork offers businesses of all sizes solutions that not only meet, but exceed, their needs. Read on to understand each of these benefits in greater detail.
1. Financial flexibility
There are five main ways that agile real estate enables financial flexibility for a business.
- Reducing capital expenditure: WeWork’s position in the market unlocks unique business opportunities. First, by combining in-house vertical integration with scaled buying power, we pass on our savings to our members. Then we amortize our standard fit-out contribution over our long-term leases and charge members only for the time that they occupy the space.
- Stabilizing expenses: WeWork offers a fixed rate with annualized escalations on property costs, operational expenses, amortized capital improvements, and management fees—providing predictability and stability for every real estate budget.
- Optimizing committed liability: WeWork provides shorter-term memberships compared to market-standard leases—resulting in reduced balance-sheet liabilities.
- Aligning with GAAP/IFRS: WeWork addresses changes to the generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) by offering products that can reduce balance-sheet impact.
- Increasing real estate adaptability: Businesses are able to adapt their real estate footprint no matter how often employee head count might fluctuate.
2. Workspace flexibility
Agile real estate also refers to the flexibility of the physical workspace in which your teams will be placed. Flexible workspaces have been on the rise in cities around the world. For example, in 2018, the scale of collaborative workspaces in Manhattan alone increased by nearly 70 percent, growing from 9.4 million square feet in 2017 to 13.5 million square feet, according to CBRE research. Flexible workspaces provide more value for a business looking to save time and money while extending their overall office footprint and allowing teams to work more effectively together.
WeWork offers collaborative workspaces: a form of flexible space in which employees of various companies work under one roof. In most cases, your company will have a dedicated office or floors with the option to access beautifully designed common areas and top-of-the-line amenities, which can unlock outsize value for your company.
3. Spatial efficiency
Agile real estate can also improve the efficiency of your portfolio’s footprint. Historically, the traditional real estate sector has had a Goldilocks problem: The average lease term is 10 to 20 years while employee planning cycles are around three. This leaves most companies with either too much or too little space.
WeWork enables businesses to use space more efficiently—by requiring less of it—in two primary ways. First, WeWork typically operates at higher densities than traditional workplaces, using data to determine the best possible design to balance employee comfort and collaboration. Second, our members have access to a diverse range of shared amenities, such as kitchens, lounges, large meeting rooms, and training areas. Accessing these resources on-demand enables businesses to reduce their direct space requirements.
In fact, WeWork is 2.5 times more efficient with space than a typical office, freeing up room for new people, businesses, and jobs.
Agility without compromise
In the past, choosing agility in real estate meant compromising speed-to-market, workplace experience, quality of design, employee wellbeing—or all of the above. But WeWork’s solution affords companies all of the benefits of agile real estate without any of the compromises. It’s no surprise, perhaps, that more than a third of the Fortune 500 are WeWork members. WeWork offers agility as a form of control over your business’s real estate needs.
Being agile isn’t just for software teams anymore—it’s a framework of multiple business decisions moving toward a more flexible and efficient outcome, with a methodology you can put into place immediately. Agile real estate isn’t the future; it’s happening now—and WeWork can help you get started.
WeWork offers companies of all sizes space solutions that help solve their biggest business challenges.
Copyright © 2019 WeWork Companies Inc. All rights reserved. WeWork and its affiliates do not provide tax, legal, or accounting advice. These materials have been prepared for informational purposes only, and are not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Counterparties should consult with their tax, legal, and accounting advisors and/or auditors in connection with these materials and any related determinations.