13.12.2018 by Dr. Thomas Steinmüller

Which are the new trend-setting rental models?

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Which are the new trend-setting rental models?

13.12.2018 Interview with Dr. Thomas Steinmüller | reading time: 8 minutes? Future trends
The triumph of coworking is omnipresent in the office segment. In the case of logistics space, classic rental agreements that are often concluded for several years could soon face competition as well. The so-called pop-up and pay-per-use models offer users the opportunity to rent exactly the spaces they need. In an exclusive interview, Dr. Thomas Steinmüller, Chairman of the ZIA Logistics Real Estate Committee, explains the opportunities and obstacles that exist.

Dr. Steinmüller, are pop-up or pay-per-use models a viable answer to the digital structural transition in the production and logistics industry?

Pop-up and pay-per-use concepts are two impressive examples of increasing space efficiency that we are seeing in many types of utilization concepts in real estate. And they show the importance of “own” space for tenants today: Nowadays, tenants only want to pay for what they use: in logistics for example, storage space that they actually utilized for a specific period.

This means that they need extremely flexible rental structures, which in turn pose huge challenges to landlords of logistics and manufacturing facilities. The concepts of sharing economy are finding their way into all areas of life.

How do such rental concepts shape the structure and the management of mixed-use commercial properties?

We must say goodbye to excessive adaptation of rental space to individual tenant interests. This would strongly limit the usability for other tenants. We must learn to develop intersections and added values that apply to all users. Furthermore, asset management must be more active and more efficient. Ten-year rental agreements where contact with the tenant only occurs after eight or nine years to discuss the extension of the contract belong to the past. Tenant communication now plays a much larger role in our work and can be meaningfully supplemented by digital possibilities.

Dr. Thomas Steinmüller | Chairman of ZIA & Board of CapTen
Nowadays, logistics tenants only want to pay for the space they use.

Which digital technology is needed for that – now and in the future?

Today, space efficiency can already be analyzed and hence improved by using sensors. In addition, digital platforms simplify the renting of space on a pay-per-use basis. In the future, logistics space will therefore be booked online based on the required size and period of use. Furthermore, our industry generally needs to be even more “intelligent”. This does not only simply mean pure digitization of existing processes – even if it makes sense to automate repetitive tasks. We must improve our data situation and data quality. International pioneers, such as Amazon, are already showing that it is possible to predict what will be ordered tomorrow based on Big Data. For instance, if a customer orders a smartphone today, there is a high chance that he/she will also order a fitting SD card or other accessories. In Germany, we are still miles behind in this regard. We need to rely on Open Data if we want to catch up. Thus, sharing the data from Toll Collect would therefore be a real asset to our industry. ZIA is committed to that.

In the future, logistics space could be booked based on the needs of the tenant.

Does it make any sense to install smart building technology everywhere or should this be kept as simple as possible?

The approach is wrong. Making it “as simple as possible” can discourage users, who are rather willing to pay more for smarter rental models, more flexible space sizes, and shorter rental periods. This requires installation of adequate technology. Pay-per-use concepts also eliminate risks of long rental agreements for the user. Of course, the requirements for building technology have increased significantly in recent years, but that is part of the letting risk. However, digital options should always be close to the customer and not decided from the top down. The smartest property will not help if the user cannot or does not want to use existing technologies.

Dr. Thomas Steinmüller | Chairman of ZIA & Board of CapTen
Sharing the data from Toll Collect would be a real asset to our industry.

Which legal issues need to be resolved in order to implement the new rental models?

German data protection law is a huge obstacle in the development of new rental models. The use of sensors enables landlords to understand exactly when a space is being utilized – and often by whom. The collection of these data can certainly be considered critical. Here, the legislator must ensure greater clarity and predictability. Not least the GDPR, whose effects are clear to all of us in our email inbox, has unsettled the German economy enormously. The federal government must create regulations based on the requirements of the European Union in order to facilitate the implementation of new rental models. Otherwise, we will continue lagging behind the international competition.

Will temporary letting solutions not lead to a decline in the quality of space – e.g., due to the frequent conversion measures or the lack of representative character on such spaces?

We should not view this as a temporary but as a flexible solution. Of course, an adaptation to the wishes of the tenant makes sense, but then it should also work in general for many other relevant users. The representative character of such space can be guaranteed through a modern ambience. After all, if it is the pay-per-use concept that matters to the tenant, he/she should be able to obtain functional and hence not individualized premises. Anchor properties that are adapted to the needs of a tenant can of course also be offered. Here as well, we can orient ourselves once again to utilization concepts that are many steps ahead e.g., office space. Coworking spaces are also used by corporations – e.g., to outsource creative or innovation departments – and are usually not adapted to their individual requirements. The classic office space, which also corresponds to the design concepts of the corporations, is still there. It is just an additional offer, i.e. an incentive for employees. And they accept it thankfully.

About Dr. Thomas Steinmüller
Dr. Thomas Steinmüller | Chairman of ZIA & Board of CapTen
Dr. Thomas Steinmüller has been the Chairman of the ZIA Logistics Real Estate Committee since 2010. Steinmüller is also a member of the Management Board of CapTen AG, a consulting firm for investors and logisticians.
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