Austin, TX based startup Swivel takes inspiration from consumerized buying experience and applies the lessons to office leasing
by Dave McKenna, Editor CREB on June 25, 2020
Why can’t leasing a new office be as fun as customizing a brand new 2020 Corvette Stingray? That is just what Scott Harmon is trying to do with Swivel, an Austin, TX-based digital leasing platform for small and medium sized offices.
I dare anyone to browse over to the Corvette Configurator online – just try to escape in less than half an hour of virtually-building the road machine of your dreams. I opted for the convertible in Sebring Orange, with full racing stripe and trident spokes!
Renting office space on the other hand is one of the more miserable experiences one can have in life. It is like a personal Fyre Festival that lasts for six months — a dark pit of time-lost forever, discomfort, monotony, and considerable expense.
So, what if looking for new office space was actually more like fantasizing about eating up the road in 6.2L V8 with 495 horses snapping out a 123.2 mph quarter…? Harmon founded Swivel to make leasing office space more engaging and faster, like configuring and purchasing a car online.
Consumerized Leasing Experience
Over the course of twenty years, Harmon has had to acquire space for his various companies, and he always hated it. “You have to search, and negotiate, and design, and pay lawyers–all to just to get a decent place for your people to work,” said Harmon. “I felt ‘dirty’ every time. None of the processes seemed to be designed for me as the lessee. The whole experience seemed to be designed by-and-for landlords.”
The idea to be able to visualize and customize a space online before buying came to Harmon when he was configuring his next car on-line. “You could personalize the car down to the material on the shift handle! It is such a much more engaging experience than going down to the car lot and picking one of three colors.” And so the idea for Swivel was born.
Like the Corvette Configurator, Swivel provides a virtual leasing experience that enables prospective renters to tour the space in 3D, navigate within the space on-line, and virtually reconfigure the space based on their specific desires. Its all about making the experience visual, interactive, and engaging. “We’re the tech stack that landlords can use to make the leasing process more consumer-friendly,” said Harmon. After the visitors to virtually tour the space in 3D and customize the look they want, they can progress to the actual negotiation of the lease right there on-platform.
Harmon points out that Swivel is helping to solve the same problem WeWork attempted to tackle, but with a superior business model. “WeWork made leasing more steam-lined and flexible by becoming a landlord,” said Harmon. “At Swivel, we’re accomplishing the same thing, but with software rather than real estate. Swivel’s tech stack helps owners and operators market their properties and to set and negotiate customer-friendly terms.”
The interactive experience of exploring the space gets potential lessees in the virtual door. But steam lining the leasing activity itself was key for Harmon. The average commercial lease takes four to six months to finalize and thousands of dollars to execute. To help accelerate the deal, Swivel provides a lease abstraction process allowing the parties to establish terms on-line and then generate leases from the landlords pre-defined legal boilerplate. The automation of the negotiation process significantly lowers the friction inherent in many conventional leasing processes. Abstracting the lease and allowing the parties to negotiate terms directly can save weeks of back-and-forth effort, according to Harmon.
The leasing results look to be impressive. The traditional performance metrics for commercial leasing are showings, lease proposals, and time-to-lease. “A good month would have ten in-person tours,” said Harmon. “We’ve seen customers have more than 300 virtual tours in a month. This is leading to more in person tours, more proposals and shorter vacancies, and ultimately lower carrying costs for owners.” The virtual tour volume has led to better qualified in-person tours and overall shorter lead-to-lease intervals. “We expect to be able to shave one to two months off the leasing cycle,” said Harmon.
Qualified traffic is key to leasing. Bringing in more prospects for in-person tours that already have a strong sense of the space and its possibilities helps. So does the ability to pay. One of the long-duration drills in leasing is just determining if the potential lessee can afford the rent. Swivel helps landlords with that detail with an optional screening service to help ascertain if the prospective lessee is qualified. This activity alone can save weeks of correspondence.
Swivel has the wind at its back right now with the constraints of the covid pandemic. The system has added over 1 million square feet since Covid hit and is on pace to add 200,000 to 300,000 square feet per month going forward. “We’re adding people just as fast as we can to keep up,” said Harmon.
Swivel in Post-COVID World
Technology like Swivel is likely to change the CRE landscape well beyond the current crisis. “The covid pandemic is shocking the landlords into the twenty-first century,” said Harmon. They are forced to think differently and get creative — using new technology like Swivel. “Suddenly they discover their customers love it!” said Harmon. “Unsurprisingly, people do not want to take hours out of their day to tour a space that turns out to be completely unsuitable. Now the owners are thinking, ‘how else can I use this technology?’”
Harmon sees the trend to more direct leasing to be growing. “Eighty percent of the office leases in the U.S. are 15,000 square feet or less. We want to consumerize the small- and mid-sized lease transaction, which represent the vast majority of transactions,” said Harmon. These relatively simple leases, with their standard set of terms, rates, and formats don’t require third party facilitation. “Technology is changing how office leases are executed. Eight-five percent of all leases are brokered by commercial leasing agents. But more often now, the lessee is going direct to the owners through internet searches and listing sites such as Loopnet. And leasing agents welcome this, because they want to have a relationship with their customers.”
“WeWork had the right idea, but the wrong business model,” said Harmon. Swivel is betting that the right business model is a consumerized experience that helps put future lessees virtually into their future space the way Corvette Configurator puts me behind the virtual-wheel of an All-American Supercar. That sounds like a good bet to me.