September 19, 2013

AirBNB, Zipcar and co-working: Why sharing matters to real estate

The biggest economic trend of the 21st century may revolve around a concept most of us learned before kindergarten: sharing.

Known alternately as the sharing economy or collaborative consumption, the central idea is simple: Access is more important than ownership. Driven by changing demographics, the recession, growing environmental concerns and the widespread adoption of social media, an entirely new generation of businesses is coming into being.

These businesses enable the sharing of cars (e.g. Car2Go, Zipcar and Lyft), living spaces (e.g. Couchsurfing and AirBNB), workspaces (e.g. HUB and Office Nomads), tools, meals and even skills. According to Fast Company magazine, “The basic characteristic of these… sharing marketplaces is that they extract value out of the stuff we already have.”

Recently, a group of real estate professionals and master's degree students traveled to Berlin, Krakow and Detroit through the University of Washington's Runstad Affiliate Fellows Program to explore the implications of a sharing economy, why fostering human connections matters in real estate development and how it is being done successfully.

Reason #1: Independent workers need opportunities for in-person interaction with a broad network of peers.

The economies of North America and Europe are undergoing a substantial shift toward small-scale entrepreneurship. A recent article in the Harvard Business Review says there are approximately 17 million full time independent workers (freelancers, contractors or owners of a micro-business) in the U.S., a number that is expected to increase to 23 million by 2017. This represents a growth rate six times that of the workforce and it is conceivable that close to half of the U.S. workforce could be independently employed within the next generation.

Photo by Gabriel Grant

Betahaus is a coworking space in Berlin

Many of these people start off working from home or in coffee shops, but quickly come to miss the human connection and synergy that comes from sharing workspace with like-minded people. This need for human connection has spawned the creation of hundreds of co-working facilities across the country and thousands around the globe.

At Betahaus, a co-working space in Berlin, our Runstad Affiliate Fellows group met Hana Hariri, a freelance writer and passionate co-working advocate. According to Hana, “through technology, everyone is now super connected, but just online. They are craving actual interaction with real people, so they go to co-working spaces like this where they can speak and exchange ideas face to face.”

The rise of co-working has the potential to disrupt the typical models of office space development and leasing. In Seattle, there are now dozens of co-working spaces — including the HUB Seattle, Office Nomads and others — offering thousands of members flexibility and community.

As more people work independently, it is likely that there will be more demand for co-working spaces of different varieties.

Will traditional commercial office space lose favor unless it can be reconfigured to address the growing desire for greater collaboration and flexibility? How should office building design adapt to meet these growing social and spatial preferences?

Reason #2: Many travelers seek an authentic experience and connection to locals.

AirBNB, Couchsurfing and other forms of peer-to-peer guest hosting have created an entirely new and appealing option for many travelers. In a recent article in The New York Times, the CEO of AirBNB said, “Tonight we have 140,000 people around the world staying in AirBNB rooms. Hilton has around 600,000 rooms. We will get up to 200,000 people per night by peak this summer.”

In Seattle, AirBNB already has approximately 1,300 rooms listed. By comparison, Seattle's largest hotel, the downtown Sheraton, has 1,258 rooms. Not only do services like AirBNB provide a tangible service — providing convenient and peer-reviewed places to stay at attractive prices — they also provide an experience chain hotels cannot offer: genuine human connection.

AirBNB allows a renter to experience a home or apartment, neighborhood and city from the more authentic perspective of a local inhabitant, but a typical chain hotel is designed for uniformity of experience across locations. A Hyatt feels like a Hyatt whether you are in Seattle or Sao Paolo.

While in Detroit, our Runstad group stayed with a couple whose Detroit Homestead is helping revitalize a largely devastated neighborhood by attracting visitors to stay and participate in their urban farming experiment. We spent an evening sitting around their outdoor fireplace, meeting neighbors in the garden and hearing their stories about what attracted them to Detroit. It was a singular experience that no hotel chain could ever offer.

Though there will likely always be a market for hotels, the AirBNB experience of meaningful personal connection and an insider's perspective on a place is what makes peer-to-peer hosting so popular.

Will hotels, clearly threatened by AirBNB in places like New York where they have sought to have it banned, modify their business model in response?

Reason #3: We are fundamentally tribal beings who are wired for community.

The population profile of American cities is shifting toward households made up of singles or couples without children, dual working parents and aging baby boomers. These demographic trends, combined with the ever increasing busyness of life, have left many people feeling isolated, stressed about finding time to spend with their kids and lacking a meaningful connection to their community.

In addition, although we are more digitally connected than ever before, many people feel less close in an authentic human way, a paradox MIT professor Sherryl Turkel calls “connected, but alone.”

Born out of a desire to counter these trends, the growing co-housing movement seeks to create living situations that address the fundamental human need to share resources and connect with one another as a community. Unlike the majority of current housing in the U.S. that is designed primarily around privacy and individuality, with co-housing, human connection comes first. The housing is designed to meet the desires of the community.

An example from Berlin is Alte Schule Karlshorst, an old schoolhouse that was turned into a multigenerational residential building with extensive shared spaces such as common kitchens, workrooms and gardens. Families raising children, singles and elderly residents — for whom a third of the units are reserved — have deliberately created a supportive community there.

How can the real estate field address this desire for greater community? Could co-housing represent an opportunity for housing developers to differentiate themselves by shifting away from the traditional suburban model toward one in which housing that fosters social connection is created and managed with active collaboration by the residents?

The sharing economy is based on a simple idea: to share resources and connect with other people. But it has profound implications for our relationship to goods, services and our communities.

Co-working spaces, peer-to-peer accommodation and co-housing offer three examples of how the real estate field has begun to shift in response to the ethos of the sharing economy. But this is likely just the beginning of a transition within real estate that will undoubtedly be disruptive but that will also create huge opportunities for developers who can create spaces that bring people together in meaningful ways.

Gabriel Grant is a 2013 UW Runstad Affiliate Fellow and vice president of HAL Real Estate Investments. This year's Fellows will be presenting “Place Capital: A Live Documentary Film About Cities” on Oct. 3.