A Concise Outlook on the Space as a Service Concept: Its Advantages and Challenges
Space as a service is a business model introduced by the commercial real estate industry that allows tenants to rent out only the space they require to run their operations for shorter periods. SPaaS provides co-working, co-living, and a brand-new concept called brandboxing with the flexibility to utilize space efficiently.
The current commercial real estate sector is witnessing massive paradigm shift with the help of a concept known as space as a service (SPaaS) that has redefined the role of landlords from mere tenant collectors to service providers. A business model that offers co-living, co-working, and the latest brandboxing, SPaaS has enabled landlords to expand their services portfolio and allowing tenants to utilize the space efficiently. The model that has evolved over the past few decades, entails not just furniture and fixtures, but also digital connectivity and staffing needed to run the businesses.
As per a report published by Research Dive, the global Space as a service market is anticipated to register a revenue of $11,581.3 million and grow at a stable CAGR of 4.2% in the 2021-2028 forecast period. Considering the market analysts’ predictions, the SPaaS concept is here to stay and evolve further, thus reconstructing business operational models with new dimensions in the future.
Now let’s dive into some basics about this concept along with its advantages and some challenges for the commercial real estate industry.
What is Space as a Service?
Space as a service is a business model adopted by the commercial real estate market that increases the economic security and flexibility and allows tenants to rent out only the space they require for shorter periods. Unlike the traditional approach where tenants were asked to sign a lease for commercial space with a locking period for three or five years, the SPaaS approach offers shorter lease time.
Moreover, businesses that eventually grew found themselves stuck in the space since it no longer serves their present requirements, while businesses that fell hard might feel stuck in more space with less operations and work to do. All these issues get resolved by switching to space as a service business model that offers flexibility for both tenants as well as the building owners.
Advantages of Space as a Service Model
Now that we know what exactly is SPaaS, let’s see why this concept is taking off among young entrepreneurs and startups. Here are a few advantages of space as a service mentioned below:
- Shorter lease times
- Cost-saving approach
- No investments required for furniture, systems, and internet connectivity
- Flexibility of scaling up/down the business staffing when needed
Challenges for Space as a Service Model
Despite the above-mentioned advantages and the evolution of this business approach, there are still a few challenges prevailing over the model’s expansion. Since the space as a service approach is mostly adopted by co-working platforms that incorporate multiple businesses, this often leads to lack of privacy among organizations. This also leads to shortage of the availability of conference or meeting rooms, fully occupied cafeteria, and infrequent access to the lounge area. Moreover, limited knowledge about this model and the benefits it offers is another challenge that the SPaaS market needs to overcome to expand its growth further.
The Bottom Line
The increasing penetration of innovation and technology in a rather slow-paced real estate sector is encouraging several organizations to switch to the space as a service business model. The prime enablers of this swift transformation are high-speed internet connectivity, expansion of technologies like IoT, artificial intelligence, and machine learning, and more use of digital devices. The widespread adoption of SPaaS frameworks is thus reshaping the way we work and utilize space.
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