Welcome to the sharing economy for real estate

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February 8, 2017
5
min read

Ahh, the ‘sharing economy’; the new age of free (or at least cheap) love and tech-powered community spirit. So what’s the sharing economy for real estate look like?As everyone loves to remind us: Uber, the world’s largest taxi company, doesn’t own any cars. And Airbnb, the world’s largest ‘hotel’ chain, doesn’t own any rooms. Rather, these companies (and more), profit by creating platforms that allow consumers to share their stuff. It’s all about making a few bucks off the things you already own, and having easy, cheap access to products and services you need instead of buying them outright. After all, you don’t need a drill; you need a hole. Renting a drill only when you need it is less taxing on both our wallets and the environment - what’s not to love?Some do argue there’s a darker side here. The ‘sharing economy’, they believe, is a clever label on an otherwise immoral business model. As The Nationput it; “Uber and Airbnb monetize the desperation of people in the post-crisis economy while sounding generous—and evoke a fantasy of community in an atomized population.” Are these companies actually horsemen marching in a dark epoch of ‘dot-communism’?Whatever your thoughts (we’re not here to proselytise), like many other tech trends the sharing economy is going to have a significant impact on the real estate industry. In fact, it’s already making waves.

Residential real estate and the sharing economy

That being said, the internet is already teeming with countless idle articles on how Airbnb is ‘disrupting’ the hotel industry, and we don’t want to contribute too much to that bacchanalian orgy. Instead, let's look at how Airbnb is affecting the residential real estate market.Airbnb is a far more attractive offer to most travellers than a hotel. Last year, I stayed in New York for three nights. The resulting hotel bill cost me two months rent. Later, still shaking from the blow to my already porous wallet, I decided to see what an Airbnb in the same area would have cost. I almost cringed myself out of existence. One user was offering a three night stay for just $89 - over ten times less than what I paid.With pricing like this, (and an arguably better overall experience), Airbnb have become ultra-successful. They’re currently raking in almost $1 billion in annual revenue, and are valuated at over $30 billion. But the business model that’s gotten them so far works by overstepping zoning laws. And there’s been plenty of discussion as to whether or not they’re in some way responsible for the rapid price jump in real estate markets all over the world.There have been many cases of low-income earners (often students) living in areas they otherwise couldn’t afford by constantly renting out spare rooms. And when you start using residential real estate for short term leases, the resulting boost in tourism will work to gentrify the area. While it might be all well and good in the short term, artificial gentrification can have bad effects in the long term. Bubbles burst, afterall.While it's easy to see while it might be good for tourists’ and hosts’ wallets - there’s a definite potential to drive up rent and house pricing for long-term residents. The problem being that while property prices rise, other economic resources like job growth can’t keep up. As Vice put it; ‘In an attempt to make an extra buck, you may be slowly screwing yourself out of the market’.

Communal office space

While it might not be super wise to start turning residences into mini-hotels the world over, there's definitely potential for the sharing of short-term commercial real estate. And this might prove to do a lot of good.Generally speaking, start-up companies have a one in three success rate. It’s no wonder so many prefer to work out of their parents' garage than commit to a long term lease. But why cosy up with the lawnmower when there’s so much unused office space lying around? It doesn’t seem to make sense.On the other side of the coin, office space is hardly cheap. So if you're lucky enough to have a whole lot of unused floor space lying around, you don’t want to waste it. Why put your P&L statement through the trauma?PivotDesk made the obvious connection - give commercial real estate owners the option to rent out shadow space on the short term. I.e; share. It’s a big step towards easy, efficient, risk-free sub-leasing - and so far, the results have been incredibly positive for everyone. Existing businesses, start-ups and parents alike.Imagine an Airbnb for commercial real estate - but rather than try to subvert traditional channels, PivotDesk embraces them. Commercial realtors don’t need to worry about some imminent disruption. The system is designed to work with existing real estate agents, and actually frees up time they’d otherwise spend on endless one-off sublease deals.

Shared warehousing and storage

It’s not just spare office space that’s often left to gather dust. How about warehousing?You might not think a company self-described as a ‘warehousing marketplace for on-demand pallet storage’ could ever, in a billion years, be interesting in any way. But Flexe, this exact company, has the most ingenius target market I’ve seen in a long, long time.The size of most businesses’ stock tends to fluctuate. Often a lot. This means they’re often forced to spend huge amounts on an enormous warehouse that’ll only ever be truly full for one week before Christmas. The rest of the year all that extra, expensive space goes completely to waste. Flexe’s platform solves this problem.In true sharing economy style, those with unused storage space can rent it to those who need a little extra. It solves inventory challenges while helping businesses monetise their less-than-useless empty space. They’ve turned bare warehouses into collaborative resources, and new income streams for businesses. Genius.Short story: brace yourselves, agents. The sharing economy doesn’t just end at holiday rentals. Let’s see what the next few years have in store.

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