Three things to know about managing a building with flex space
Property management strategies to maximize your opportunities with 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’s 2021 Global Flex Space Report predicts by 2030, 30% of office space will include some type of flexible space.
Demand for flexible leases is rising. Tenants are increasingly requesting expansion, contraction and termination options in leases and are favoring short-duration commitments as they await greater clarity in business conditions and workplace strategies. In 2021, flex space accounted for 3.6 million square feet of leased space, according to JLL research.
While the growth in flex space will affect players in all parts of the real estate process, there are opportunities and implications for property owners that are significant and need to be considered proactive.
Here are three things to know when considering flex space within your property:
1. Flex space attracts and retains tenants
For some asset managers, adding flexible space to your building can support your wider asset strategy. Tenants are drawn to assets that give them the freedom to grow or the ability to quickly contract. Flex space within the buildings they already lease provides more options and makes the entire asset more appealing. Also, flex spaces often act as incubators for what could become longer-term 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 drawing in new demographics and bringing new ideas to traditional office spaces.
Many asset managers have begun to think more holistically about integrating flexible space into their office portfolios, with overall usage expected to grow significantly in the years ahead. More than 40% of tenants expect to increase their use of flex space as part of a post-pandemic workplace strategy.
2. Communication is key
One of the most important considerations when entering into a traditional lease with a flex operator 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.
Your lease negotiating team must ensure there are policies that address these situations.
3. Experience matters
Whether you manage your own flex space, enter into a sublet model with a traditional flex operator or decide on a management agreement with a white-label service provider, it’s important to curate the experience people have when they are inside the space. Highly skilled experience management teams with a marketing mindset can carefully curate spaces and activities that create the elusive FOMO, from touch-free entrances to pop-ups that forge a sense of community. Remember, people are coming into the office for an experience they cannot get in their homes—enticing them in is key!
Some owners will look to their property manager to provide those services, but creating and managing a vibrant experience may not be in your existing team’s wheelhouse. That’s where a partnership between a landlord and a seasoned flexible space operator with teams trained in hospitality can help you minimize your risks, maximize your opportunities and set you up for success.
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