
Three things to know about managing a building with flex space
The role of flexible space in real estate is rapidly expanding and is predicted to constitute 30% of office space by 2030, according to JLL’s 2021 Global Flex Space Report. This growth is driven by increasing tenant demand for flexible lease options, including expansion, contraction, and termination options, and a preference for shorter-duration commitments due to business uncertainties and evolving workplace strategies. In 2021 alone, flex space accounted for 3.6 million square feet of leased space. This shift presents significant opportunities and implications for property owners, requiring proactive consideration of flex space integration into their properties.
Integrating flex space can significantly enhance a property's appeal, attracting and retaining tenants. Tenants are increasingly drawn to buildings that offer the flexibility to adapt to their evolving business needs. Flex spaces can also serve as incubators for future long-term tenants, as smaller companies utilizing coworking spaces may eventually expand and seek direct leases within the same building. Beyond practical benefits, coworking spaces inject vitality into a building by introducing diverse demographics and fresh perspectives into traditional office environments. Many asset managers are adopting a holistic approach to incorporating flexible space into their portfolios, with over 40% of tenants anticipating an increase in their use of flex space as part of their post-pandemic workplace strategies.
Effective communication is paramount when a traditional lease involves a flex operator. It is crucial to clearly define and document rules, regulations, construction timelines, and other policies in the lease agreement to prevent future misunderstandings or conflicts. Involving experts from various fields, such as legal, operational, and marketing teams, during the initial lease negotiation phase is essential to address potential issues proactively. For instance, policies regarding pets in the workplace, a common perk in many coworking spaces but less so in traditional offices, must be established to ensure compatibility with all tenants.
Regardless of the management model chosen – whether self-managed, a sublet with a flex operator, or a management agreement with a white-label service provider – curating a positive and engaging experience for occupants is vital. Highly skilled experience management teams, employing a marketing-oriented approach, can design spaces and activities that create a desirable atmosphere. This can range from implementing touch-free entry systems to organizing pop-up events that foster a sense of community. The objective is to offer an in-office experience that surpasses what individuals can achieve at home, thereby enticing them to return. While some owners may expect their property managers to provide these services, developing and maintaining a vibrant experience might be outside the current capabilities of an existing team. In such cases, a partnership between a landlord and an experienced flexible space operator, particularly one with hospitality-trained teams, can help mitigate risks, maximize opportunities, and contribute to overall success.
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