Hybrid is driving the adoption of flex space
Co-working is smashing the old model of the office and investors must get on board
Looking for more insights? Never miss an update.
The latest news, insights and opportunities from global commercial real estate markets straight to your inbox.
A few years ago, traditional office space was as vital to conducting business as crude oil was to transportation. Just as electric vehicles are changing how we commute, the hybrid work environment drives flex space adoption.
While demand for an office headquarters remains relevant – we see this as tech companies affix their nameplate to the sides of prominent office towers in major gateway cities – addressing the needs of employees who’ve come to expect more choice over how and where they work is a burgeoning priority in today’s war for talent.
What started as a sweet deal for startups and smaller companies looking for malleable lease terms, co-working space has accelerated to a multibillion-dollar industry in demand from the science, digital, and tech sectors. That interest continued last year with a 40 percent increase for flex space from the third to fourth quarter – and as much as 91 percent in areas like Atlanta, Houston, and Los Angeles.
By 2030, it’s predicted that 30 percent of office space will be flexible.
The Darwinian component
Uniquely tailored for hybrid work, a flex space strategy is now imperative for every office landlord to position themselves for the evolution taking place in the workplace.
And those who can answer the call from occupiers that want both traditional and co-working options will likely be the big winners of this market shift.
While corporate adoption into flexible space remains limited, 41 percent of office tenants told JLL they expect to use co-working space as part of their post-pandemic strategy to address pain points such as cost reductions.
The most important solutions for building owners are profitable ones that create connective experiences in their assets.
Flex by JLL, for example, has a target to open more than 200 locations and have seven million square feet under management by the end of 2025. The model is the only end-to-end enterprise-grade flexible solution that allows the owner or investor to maintain control of the space, experience, tenants, and revenue. The plan also includes partnerships under management agreements and creates streamlined service bundles desired by tenants.
One of the biggest challenges owners face when adding flex solutions to their buildings relates to capital markets. Working with a team with direct access to underwriters, different lender solutions, and knowledge of various deal structures for REITS, TRS solutions, or management agreements will be essential.
And then there’s the tenant experience.
The most important thing about tenant experience when considering flex is making sure it’s connected vertically through property management, experience management, flex space, and other solutions that you might have as a merchandising strategy for your building.
The technology needs to enable the experience and the solution so that customers can find the space, find the different amenities in the building, and create a truly social and physical experience.
The pandemic has put a spotlight on the future of the office and what the return to office looks like, triggering a renewed focus on the end-user as a main priority for tenants. Landlords must adjust accordingly because co-working and flex space is no longer just for startup culture. It is a core component of the new normal of hybrid working.