ContrariLand

Rise of the Rest partner Mary Grove recently sponsored her 5^thannual Silicon North Stars, a great program where 20 emerging high school students are given the opportunity to spend a week in the Bay Area, learning from VCs and entrepreneurs.  These kids then return to Minneapolis to deliver a Demo Day presentation. One notable moment from the event was a question posed to all students: “What company did you learn the most from?”  The most common answers were Facebook and YouTube, reasoning that “these companies showed you can have fun at work”.  These companies carefully cultivate an environment that makes work feel fun, and when things are fun, you want to do more and you are generally more effective.  In this positive cycle, the workspace increases “flow” and enhances productivity.

This can happen outside multi-billion-dollar firms as well.  Upon reflection, we see four keys ways in which (good) real estate can enhance entrepreneurialism:

1. Studies have shown that density increases growth and productivity. When you can walk down the street and have a coffee with your suppliers, buyers and competitors, the transfer of ideas within an ecosystem is faster than when they are across the city or across the world.  As this is true in the macro, it is true in the micro.  Adding density to a site creates more innovative spirit because there are more knowledge particles bouncing into one another.

This world of density leads to a transfer of energy toward social activities and work (in the best cases, these are blurry!) and away from commuting.  This is good on multiple levels as research shows that people would rather do nearly anything besides sit in traffic.

2. Humans crave community.  Our tribal heritage remains with us and the desire to be around other people is one of the few predictable aspects of our nature.  Within the world of real estate, this desire has led to a pushback against the 1980s style single use office campus (picture the movie Office Space) and the traditional setting of high walled cubicles and executive perimeter offices (see also… “Office Space”).

Jeff Bezos is famous for instituting his “two pizza rule”to keep teams small and lean.  While food-based rules are great, a better way to allow small teams to organize and operate is to have a workspace that has both open spaces and meeting spaces, places to eat and places to think.  Your home has many different rooms that allow for different aspects of your life (eating, sleeping, entertaining, lounging).  Many of us spend more time at work than at home, so it makes sense that the workplace should have at least as much variety.

3. Cities (and companies) are always selling. Selling to prospective workers, companies, retirees. Drawing high quality people and companies will improve the product, and further improve that brand.  Real estate comprises many of these amenities that companies and cities offer.  Restaurants, shopping, affordable housing, as well as natural real estate such as waterfront space and parks are all amenities that make the city and company a more attractive “product”.

4. For most of the last 100 years, signing a lease to rent office space has been a painful experience for corporate tenants.  It requires negotiation and paperwork, often done as a side project for someone without a real estate background.  This excessive complication was to the benefit of brokers as the incumbents.

It turns out that signing a single long-term lease wasn’t what tenants wanted, they just weren’t offered anything else! However, now they are.  With the rise of co-working space, tenants have a number of options.  This allows both flexibility in lease terms and in scale, as the space can grow and shrink more flexibly along with the company’s needs.

For companies, founders and cities that don’t think much about real estate: Understand that the more density, community, amenities and flexibility you offer, the more engaged your current and future workers will be.  Yes, real estate is a cost.  But you better believe that Facebook and YouTube see it as an asset in recruiting.