Thanks to Eric Odum of Net Lease Commercial RE for inviting me to join his monthly podcast to talk about the growth of tech start-ups and the impact on commercial real estate. Three years ago when we met, Coworking was not even on the radar for CRE & economic development. Now that small (& virtual) is the new big, government officials and business leaders are trying to understand what has happened to their traditional market for office space and how should they react. With most of economic development’s efforts focused on development and not economics, this has put a real crimp in many regions’ strategy for growth. Shovel-ready has been replaced by bandwidth and workforce-ready leaving many areas that are dependent on new construction wondering how they are going to recover from the current economic downturn.
In this video we talk about Coworking as an ideal option for start-ups that needs office space, but we also discuss how the trend toward smaller offices and a distributed workforce started back in the early ’90’s. In 1992 Compaq shrunk their office footprint and outfitted their field sales force with home offices. This encouraged the sales team to spend more time with customers and less time taking up space around the corporate water cooler. Several years later IBM followed, introducing the concept of office hoteling. This was simply desk space you sign out for a day when and only when you needed to be in the office (sound familiar). While there were some unintended consequences and this strategy was relaxed in later years, the trend toward a smaller footprint and more mobile workforce in tech had begun. This should have been plenty of warning for CRE and economic development agencies to adjust, but during the high times of the Internet boom and the take no prisoners commercial real estate / residential mortgage bubble, there was little incentive to heed the warning and plan ahead.
It all comes back to the fundamentals of marketing. Not the outbound marketing and flowery advertising that encourages people to move to Florida for sunny beaches and oil-free sand. That old-school beauty contest approach to economic development ran out of steam along time ago. I’m talking about the kind of marketing where you actually watch trends and listen to customers (companies & workforce) to understand their changing needs. Ignore the market and it has a nasty way of kicking your ass. No amount of feel-good press releases, ribbon cutting ceremonies or fancy proclamations about how your region is going to be the next Silicon Valley is enough to shake the stigma of being labeled The Ponzi State in 2009 by New Yorker Magazine. Digging our way out of this economic hole goes way beyond just recovery. If recovery is the goal, then many are content to wait for tourism and construction to limp back and reclaim its position in the economy. Tampa Bay needs to focus on building a sustainable economy based on businesses that will better weather the next downturn. That may be tech, it may be medical, it may be energy, it may be all of the above and more. Whatever industries take root and grow here rest assured they will not be playing by the same old comfortable rules that are at the center of current economic development and CRE strategies. Listen, adjust and act.