Three things to know about managing a building with flex space
Three tips on property management strategies for office buildings with coworking or flex space
It’s clear that flexible space is playing an increasing role in the evolution of real estate and won’t be going away anytime soon. JLL research predicts that while flexible space currently accounts for less than 5% of U.S. office stock, by 2030, 30% of office space will include some type of flexible space.
Coworking, the fastest growing sector of the broader flexible space movement, is on pace to become the top source of office leasing in the U.S. In the first half of 2019, coworking accounted for more than 10.1 million square feet of leased space, according to JLL research. That’s more space than was leased by finance and insurance companies, which have historically been significant consumers of space, and just behind technology companies.
While the growth in coworking will affect players in all parts of the real estate process, there are opportunities and implications for property managers that are significant and need to be considered proactively. Here are five things to be aware of when managing a building with flex space:
1. Flex space isn’t for everyone
For some assets, adding a coworking operator to your building can be advantageous and support your wider asset strategy. There can be leasing velocity gained by adding the fastest growing use of office space to your tenant roster. Also, coworking spaces can act as incubators for what could become direct tenants. In other words, that one-person company relying on coworking space could soon become large enough to rent directly in the building. There are other benefits, too. There’s added energy in buildings with coworking spaces as more millennial-focused businesses draw in new demographics and bring new ideas to traditional office spaces.
But because of the newness and nuanced approach of coworking, having those spaces in your building can present a new set of challenges for owners and property managers. For instance, flexible space operators can increase density in buildings that weren’t necessarily built to handle it. As property managers, we have to ask ourselves whether or not a building will truly be better off with flex space in it.
2. Communication is key
One of the most important considerations when leasing to a coworking tenant is how they will use the space and how that may affect the other tenants in the building.
Defining and memorializing rules and regulations, a construction timeline and other policies in the lease agreement is critical to avoid any confusion and potentially awkward conversations later on. It’s critical to have people with different areas of expertise involved in the beginning of the lease negotiation process to address these issues before the agreement is cemented.
One example is having dogs on the property. Having pets in the workplace might not be typical for more traditional office tenants, but many coworking subscribers consider it a must-have perk.
“We worked with the lease negotiating team to ensure we had policies that addressed this desire for the coworking tenants while also ensuring there was no outsize impact on existing tenants,” says Deborah Loewenstein, JLL Group Manager. “Logistically, we had to think outside the box about where we could put a pet relief area and how best to get the dogs in and out of the building.”
3. Experience matters
It’s not just about having experience in managing buildings with flex space. It’s also about being able to curate the experience people have when they are inside the space. While some owners will turn to flexible space operators to manage these experiences, others might look to their property manager to advise on or execute experience management.
In fact, a KPMG study shows that 96% of investors agreed or strongly agreed that the customer and user experience of buildings will be critical to successful commercial outcomes in the next five years.
“Many of today’s office tenants want an experience that is as flexible as their space,” said Tom Larance, JLL Head of Experience Management. “The expectation will soon be that the firm hired to manage a building will be the same firm that can create the experiences tenants want in their flexible space. Creating and managing the vibrant experience of a flexible space offering is the next stage of being a full-service property manager.”