John Ward is the Chief Investment Officer of Bridge Investment Group’s Office Strategy and a Principal at Bridge Commercial Real Estate
Enterprise flex office space was already gaining steam in the immediate aftermath of the pandemic, but most of that momentum was fueled by small firms and teams of independent contractors while larger companies stood still or allowed employees to work remotely. However, new numbers show a major shift is now underway as Fortune 500 companies and other large firms plan to add significant amounts of flex space to their portfolio soon.
According to a recent CBRE study of 185 corporate real estate executives, more than half of respondents expect flex offices to comprise a significant amount, or 10%-50%, of their total portfolio over the next two years, signaling a 34% jump from those who hold that amount right now. This number will only grow in the years to come as more than two-thirds of those polled listed flex space as their top choice for the most important building attribute they are considering among 10 different categories
Though the novelty of major companies that have allowed employees to work fully remote has dominated headlines, the data clearly shows it is the exception, with 85% of major employers wanting their staff back in the office at least half of the time. The hybrid model, favored by many companies, enables an easier transition for previously remote workers returning to the office for at least part of the time, with flex space enabling businesses to preserve the agility they need for future decision-making.
Flex office provides a hybrid approach that can be more attractive to potential workers or tenants who feel hesitant about making a long-term commitment. This also bolsters recruiting and retention efforts, which are more important than ever. According to a report from McKinsey & Company, many of today’s current office spaces are unable to meet the demands of hybrid work, forcing owners to re-imagine these spaces, the amenities that surround them and the food and beverage options they provide.
At its core, enterprise flex office space blends a classic coworking setup with the best elements of traditional office space through leases that typically average between 12 and 36 months. Many office owners now brand their space as “flex,” but beware of imposters who are actually marketing shared coworking space or private spec suites that don’t possess the true characteristics of an enterprise flex environment. Here are three “must-have” elements large companies need to factor in when planning their future flex office portfolio.
Flex space must be multifunctional and used regularly. Modular office furniture, like desks and workstations, should be moveable to allow for a variety of seating and working options. Property managers should activate the space frequently through booking company happy hours and hosting events with third-party organizations. It’s important to create many social situations where tenants can connect with each other and exchange ideas. Using the building as a vessel to create a microcosm of the surrounding community can ensure success within a thriving property
Office space decision-makers should create a network of flex space to ensure connectivity. The ability to have a dedicated network of flex office space across multiple markets with one provider is more accessible than a piecemeal approach with many different landlords. A cohesive brand under one entity provides familiarity and can make the onboarding process much easier for new tenants.
The network should also allow a tenant who works in Atlanta to use space in Chicago or Miami, and property technology plays a huge role in this. At our company, Equiem and SwiftConnect are used so tenants can stay up-to-date with propertywide events, book conference rooms and capture insights on office occupancy. Providers with a national presence tend to have higher-quality spaces and a large offering of enterprise flex space. Property managers play an important role in building this brand and providing best-in-class service.
Enterprise flex space provides risk protection at a more reasonable cost than a traditional office lease. Flex lease terms are more attractive right now because they decrease occupier uncertainty as many companies do not want to be locked into a standard five- to 10-year office lease. Unlike traditional coworking spaces, companies that go the flex route are able to retain their brand identity and reinforce positive culture touchpoints with employees. Spaces can be customized with logos and core colors, allowing occupiers to cultivate a sense of place best tailored for each organization.
To remain competitive and be successful, corporate real estate decision-makers should seriously consider recalibrating their portfolios to include more enterprise flex office space. Lean into technology, create connectivity with regular activations and negotiate flexible lease terms that position your organization for long-term growth and success. Flexible office space will continue to play a leading role for companies of all shapes and sizes in the decade ahead, striking the balance between the autonomy today’s workforce seeks and the collaborative atmospheres that enable every business to thrive.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.