Adapt to thrive? Approaching Real Estate as a Service

The outlook for commercial real estate is guardedly optimistic for the coming year. Strong corporate activity is supporting demand while capital and debt availability is high, driven in part by investors looking for an inflation hedge.

But the sector still faces fundamental long-term challenges. The pandemic has caused significant shifts in where people live and work, and how they buy goods and spend their time. These shifts in turn are impacting how and where real estate is built and how it is utilized. At the same time, developers are facing increasing demands to prioritize environmental, social, and governance issues, and address the problem of an aging technology infrastructure.

A recent survey of senior commercial real estate executives suggests an innovative approach to meeting the development challenges of the post-pandemic period. It recommends adopting a Real Estate-as-a-Service (REaaS) model, which “combines strategy, technology and data to deliver digital and physical services – not just space – to tenants and users.”^* This type of model would include enhancements to improve the tenant experience, such as:

• Sustainable and energy efficient properties
• Dynamic building designs that include such things as reconfigurable spaces
• Flexible leasing models, including revenue sharing or management contracts

REaaS generates revenue based on the outcome of an improved tenant experience and productivity. It fundamentally changes the business model of property owners who are now in the position to become service providers as custodians of physical and digital infrastructure.

After the shock of the pandemic, the prospects for commercial real estate are positive. But those who succeed in the industry will have to adapt to new market realities and embrace new ways of understanding and delivering value to their tenants and others who use their facilities.

As you consider your strategic direction, remember that your Washington Trust Relationship Manager is available to help you ensure the long-term success of your business.