March 28, 2012 Leave a comment
As a 2 year old outsourcing startup that services SMB back office operations for the likes of established firms and new economy businesses, PARR is often faced with difficult decisions about how to find and use facilities to better serve clients. For all of the firm’s collective experience in complex transactions and professional service delivery, finding the right facility and long-term office arrangements has proven to be one of the company’s hardest challenges.
Given the emergence of the digital economy, real estate choices have grown for all firms. But the volume of options can predictably lead to some paralysis. Throughout the search for the ideal facility, Parr faced the constant dilemma of finding the right balance of a functional and attractive physical space with the needs of a flexible, modern and scalable technological infrastructure.
Maybe the whole episode would have been easier if the company learned early on that there was a name for this trend – “Phygital”. Where have we heard that word before?
One Chicago firm describes the development as applied to commercial real estate:
The “phygital” trend – the blending of physical and digital commerce – continues to redefine the commercial real estate industry. Retailers such as Home Depot and Paypal, Foursquare and Walgreens, and Amazon are exploring ways to bridge the phygital divide. Tools and apps like QR codes and Belly bring the mobile world into the physical consumer experience. The use of social media among landlords is increasing, while traditional office spaces redefine their use as incubators for the next generation of internet giants.
We’ve known about the ongoing convergence (or collision, if you will) of the bricks and mortar world with the digital world for some time, but it was never so clear that the phygital trend has application to the process of site selection that small- and mid-sized businesses (SMBs) struggle with today.
Site selection is a well-established field (actually it’s a conglomeration of many disciplines) that engages some real-estate professionals full-time, and is important enough globally to draw the devoted attention of multinational firms that track the industry on a much larger international scale. Real estate expertise is so valuable that you can find experts to guide your company’s site selection process within a 5 block radius or a 5 continent radius. Don’t expect a glossy insert or double-sided brochure to convey the importance of these issues. This stuff is the subject of white papers, full-blown analytics platforms, and dedicated site selection specialists, all of which cater to both supplier and buyer segments. Global consulting giant KPMG has a whole vertical devoted to this area with its own brand identity under the Competitive Alternatives moniker.
In some ways the intertwined macro/micro views are like the yin and yang of the commercial real estate market – each exists in its own space, but is integrally bound with the forces of the other. Despite having a principal with significant experience as a development specialist, Parr experienced first-hand the difficulty of applying that specialized academic and professional knowledge to its own operations, particularly in a quickly evolving local urban realty market like Chicago.
As they do for many SMB firms, the significant capital costs and onerous restrictions of long-term commitments common to commercial leases have proven to be a barrier to setting up shop in a permanent home for Parr. Some professionals remind us that office costs are probably the second largest expense for most companies behind personnel and labor expenses, and other forms of human capital. No wonder that it’s tough to pull the trigger on such a significant capital investment when firms are trying their best to remain capital lean.
Can companies ever commit to a home when they covet their mobility? This fear of commitment sounds a lot like a bachelor’s restlessness to maintain freedom at all costs. I guess corporations really are people too, right?
- The App-lification of CRE (coydavidson.wordpress.com)