Combining innovative spaces with innovative services

Consumer products are developed with a specific customer in mind. Commercial real estate often doesn't. A leased space is expected to serve anyone who happens to pay for it. The customer then needs to determine whether the space fits its needs; and then, furnish it, erect additional partitions, install various systems and tools and find ways to occupy unused areas. They must rely on various service providers in order to create the product for themselves.

Most real estate owners and operators are driven by “How to fill the space?” and not by “How to serve the customer?”

Niched real estate operators such as storage companies, serviced offices or hotel operators focus on a specific group of customers and develop a product and offering that suits their exact needs. All the customer needs to do is pay and move in; they get what they want, when they want it. Focusing on the customer creates a relationship. The space itself become secondary — the operator can move its business to the building next door and the customer will follow. In a rapidly changing environment controlling the customer relationship is proving to be more valuable than the underlying real estate.

Despite the controversy around WeWork's IPO in late 2019, the company proved that short term, flexible, consumer-friendly office space is a trend that resonates globally. They started by focusing on an under-served segment of the office market, catering to the smallest and least valuable customers who could barely commit to a lease or buy their own desk. It facilitated the sharing of larger spaces, but sharing is not an end in itself. It is simply the best way to serve this specific group of customers at a price that makes sense. Focusing on a different group of customers would result in a different type of solution, probably without any sharing at all.

This is already happening. Companies such as Inospace, who own and manage business parks in South Africa are focused on larger companies and the corporate market, providing what is known as “space as a service”. It turns out that even large companies want to enjoy a space designed and operated with their specific needs in mind. They don’t want to share, and don’t need want month-to-month leases either; they just want customer service.

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Inospace, has established that larger commercial clients are increasingly relying on additional business facilities that complement their businesses as well as flexible spaces that are offered alongside traditional warehouse spaces leased on long-term contracts.

One such example, is flex warehousing and storage products offered at inospace’s Jet Works Park near OR Tambo International in Isando Johannesburg. International group Johnston Controls leases an 8,000 square metre logistics facility, on a long-term contract, for HVAC equipment and supplies. In summer demand for their products increase, so on-site flex spaces allows them to get additional space on short term contracts. The park also offers office and studio space and is used by the company when needed. The additional flex spaces are designed for both existing customers of Jet Works as well as external users.

inospace operates both an innovative operating model and an underlying asset base of valuable real estate assets

inospace’s 25 branded business parks offers flex space in all its parks. The company converts industrial buildings into branded business parks that offer a wide range of customer-centric services and facilities including various sized industrial, office and storage spaces.

According to founder and CEO, Rael Levitt, the company offers a variety of very affordable space that can be used for a wide range of activities, “Our spaces are flexible. A unit can be a storage facility, it can be a light industrial facility, it can be industrial-style offices, or it can be all three at once”.

According to Levitt the reason why the company has grown rapidly in a weakening property market is that their flexible offering morphs with their customer's need and market demand. “We simply offer what no-one else provides and that attracts a constant stream of users”.

Serviced business parks offer a host of customer benefits and facilities

"Our serviced business parks are typically 10,000 – 20,000 square metre industrial-type buildings that are anchored on 75-80 percent of traditional industrial tenants on long term leases” he explains, “but the balance is pure flex. Since industrial space is the cheapest asset class and we offer a wide range of customer-focused benefits and services, we fill our parks in seconds”.

The roofs accommodate height, there is ample free parking on site and the buildings are designed to handle the power demands of a wide range of businesses. According to Levitt, “At the front of the park you will find a well-designed business hub with cute slogans and trendy furniture as well as free meeting rooms, communal spaces and coffee shops, while around the back, there are traditional loading docks, roller shutter doors and box style warehouses”.

At Inospace's Cape Town parks, their spaces are popular with technology companies. “That's because it's relatively cheap and these companies don’t worry about impressing customers with flashy expensive offices. Our spaces are becoming very popular with call centres, such as on-line food delivery service OrderIn, who are headquartered at Island Works in Paarden Eiland and on-line education content provider Hubble Studios, who are based at Powder Mill, Ndabeni" says Levitt. "These sort of companies enjoy the host of services we offer as well our community ethos, fibre-optic offerings and other shared infrastructure” says Levitt.

Credit Bureau, ITC, is moving into Inospace’s latest 25,000 square metre park in Paarden Eiland, Cape Town. “They like it for the easy access it provides and the fact that it is far more affordable than the traditional CBD offices, where they are currently located” says Levitt. For many Inospace tenants, access to the major highways is important, though it doesn't necessarily have to be the same immediate accessibility that many logistic company’s demand.

For South African shoe brand, Veldskoen, inospace’ s flexible business parks work well on many levels. "The company does not have retail outlets and they sell their iconic shoes on-line. Our spaces give them an all-in-one environment," says Levitt “They have a professional space that includes administration and sales, but it's also a place where customers can come to see products, while being a warehousing and on-line sales distribution facility”.

A critical component of the Inospace business model is their decentralised on-site park management service that is not dissimilar to a hotel operating model. “Our on-site Park Managers are a combination of property managers, community managers, sales managers and asset managers.

They not only develop direct relationships with our customers but play a key role in leasing out spaces and working with our marketing team in generating a constant flow of customer leads”. Each inospace site appoints a Park Manager as well as a Community Manager who deals with a growing business network.

New property companies, like inospace, are adding a layer of services on top of traditional real estate assets and are capturing relationships with customers. Demand for flexibility, built in systems, and better amenities for employees presents new opportunities for property owners. it also presents a new operational complexity and the need to develop solutions that offer tenants a comprehensive solution across a network of locations

A layer of services on top of traditional real estate assets

In the hotel industry, it is now common to split businesses into separate companies, one owning the actual property and another responsible for marketing and customer facing operations. That's how inospace operates. “We believe in combining both property ownership and a sophisticated retail-like operational platform. In this way we offer a full value chain to consumers. If we were simply traditional real estate investors looking for long term yield, we feel that we would be at risk of becoming an interchangeable piece in a value chain dominated by those who directly own the customer relationships”.