Record Number of Landlords Turning Their Unused Office Into Flex Space

Commercial real estate, once a steadfast industry that has survived several impactful crises, has come under threat in the aftermath of COVID-19.

Remote working has upended the way people work now and into the future, with traditional landlords having to revise their old business models to reduce their risk of obsolescence.

This article looks at the upward tick of landlords transforming their unfilled offices into flex spaces while explaining this occurrence.

Shared office spaces is the future of flex space.

What’s Happening Right Now?

During the pandemic, fears about an “end to the office” were felt, with several offices emptying and coworking spaces either shutting down or changing hands.

However, with vaccines circulating and people emerging from their remote work hibernation, office life isn’t at threat of extinction but the face of it has changed instrumentally.

People have more of a say about where, how and when they’d like to work, and with bigger enterprises facing headcount uncertainty, fixed leases are falling out of favour for short-term rentals.

Moreover, with landlords facing the realities of vacant or half-occupied space, the value of coworking models has increased tenfold as a way to fill and monetise offices.

How Are Landlords Expected To Change?

Even before the pandemic, the concept of space-as-a-service brought about a paradigm shift in the commercial real estate industry. This office income model is similarly built to a hotel, where landlords take on the role of a service provider rather than merely rent collectors.

“There’s less focus on the square meterage contained in an office space, and more interest in a company’s performance and how it enhances tenant experiences.” Says Grant Philipp, CEO of Office Hub.

There’s less focus on the square meterage contained in an office space, and more interest in a company’s performance and how it enhances tenant experiences.

- Grant Philipp

How Are Landlords Going About Revitalising Their Flex Spaces?

Over the last twelve or so months, landlords, feeling the financial pinch of unoccupied space, are teaming up with flex space operators to turn things around and put bums in desks.

However, with this, forecasts have been made that see an end to subletting models and inflexible, long-term leases. Why? Because while landlords are showing interest in flex space, operators don’t want to take on the risk of more leases.

Instead, flex space operators teaming up with landlords are utilising management agreement partnerships based on a shared revenue model.

According to Philipp, “although it’s still early days, people are turning toward management agreements because these provide more mutually beneficial incentives for parties involved. The landlord is motivated to fill space, while the space operator hopes to mitigate risks of running a flex space.”

However, partnering up with coworking operators isn’t a landlord’s only option, with others striking out on their own and building their coworking space from scratch.

What Advantages Are Landlords Experiencing?

One of the most considerable advantages landlords experience are happy, satisfied tenants who are more likely to stay on for the long haul.

By listening to what their tenants want and improving the quality of office life, tenants are less inclined to leave.

This equates to higher tenant retention, lower turnover costs, and a markedly improved chance for attracting new customers.

Repurposing an office into a flex space also broadens the tenant market, including fast-growing startups and more prominent, established companies.

By opening up their doors to a diverse working demographic, landlords can expect steady growth and another kind of income stream that provides relief from solely relying on one tenant.

Repurposing an office into a flex space also broadens the tenant market, including fast-growing startups and more prominent, established companies.

What Challenges Might Landlords Face In Setting Up A Flex Space?

Setting up flexible space to have flexible space is dangerous and short-sighted if the following factors aren’t considered.

Is the location that your building’s somewhere safe, desirable and accessible? Furthermore, is the price right for the area?

What does the layout of the building look like? Are there windows, and does an abundance of light filter through? It could be harder to acquire occupants in windowless internal offices.

Although flex space prides itself on having diverse workforces from industries, it can’t be denied that different sectors have different needs.

Do a bit of market research to identify the types of potential office occupiers in your area and then develop these spaces with the suitable designs, infrastructure, and amenities required.

The trick here is to make things simple by creating a membership package all-inclusive. Adding multiple extras to the monthly bill, with exceptions to this being meeting rooms, can be significantly off-putting to tenants.

What Is The Future Of Flex?

Taking a closer look at Office Hub’s flexible statistics, there has been an impressive increase in growth of shared space globally. At the same time, demand for these kind of flex spaces climbed incrementally despite the challenges faced last year.

These numbers show us that a pattern is emerging whereby shared offices are no longer on the fringes and what’s becoming more apparent is that people’s mindsets about what they want are evolving and shaping the future of the workspace.

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