What is flex space in commercial real estate? Flexible space – also known as “flex space”– has become a hot topic in the commercial real estate (CRE) industry, especially in the office sector, as property teams face the possibility of shrinking leases and diminished renewals due to remote and hybrid work.
With commercial flex space, properties can offer tenants space for multipurpose workspaces to meet their business needs. And with landlords looking for new ways to utilize and draw additional revenue from their buildings, flex space could be a great solution for the commercial office sector.
So, even as the CRE industry continues to evolve and commercial office spaces adapt, it doesn’t mean there aren’t more opportunities left for property teams to capitalize on. Flex space, for example, is just one way properties can create a unique value proposition while also adapting to changing tenant needs.
Continue reading for more insights into flex space and what it means for the evolving CRE industry.
The ins and outs of commercial flex space
What exactly does commercial office flex space look like for property teams, and what does it mean for them? What goes into creating flex space offerings for tenants? These are the questions on many property teams’ minds as they learn more about the opportunities of flex space.
For one, flex space means that CRE landlords can offer office spaces with flexible (and in some cases, shorter) lease terms. On the other hand, flex space also allows tenants to tailor spaces for their exact needs. For example, the space can be comprised of smaller suites grouped together by shared areas such as conference rooms or kitchenettes.
Or, tenants can use flex spaces as they solidify their hybrid work plans. Flex space allows for more flexibility for tenants, especially if the number of people using the office space differs depending on the time or day.
With so many ways to utilize flex space, you’ll first want to consider what works best for your building. Do you have the availability to create flex or hybrid space? If so, that could become a new revenue stream for your building.
For some inspiration and proof of concept, some hotel brands have been doing this for years (even before the pandemic). Other CRE companies, such as JLL, are seeing the value as the world of work has become all about flexibility.
The rise of flex space backed by data
Consider this: By 2030, 30% of office space will include some type of flexible space, according to the Global Flex Space Report from JLL. And in 2021, flex space accounted for 3.6 million square feet of leased space, according to that same JLL research.
Other research, conducted by Building Engines, shows that 46% of commercial office teams aren’t sure how much of their building’s rentable square feet (RSF) will change to accommodate flex space over the next two years. And with flex space’s rise in popularity, it means that properties might be missing out on potential revenue streams.
Now is the time for teams to consider how they can rework their spaces to accommodate tenants’ needs. Don’t let this be another missed opportunity.
Thoughts on flex space from a CRE expert
Tim Curran, Executive Managing Director, Property & Asset Management Technologies, Building Engines/JLL Technologies, agrees that flex space is a major opportunity for landlords. However, flex space is not a quick fix. It requires time and continuous planning. So, property teams must work with their tenants to create spaces that will work for them and their buildings.
“We don’t know what the new normal is going to be,” Curran said during a recent webinar discussion. “Most customers are not in the flex space business. [So, tenants must think], ‘How do I staff? How do I change my thinking? How do I lease the space? What do contracts look like?’ You have a lot of differences with flex.”
Curran added, “We are thinking ahead to what our clients are going to need. And we are trying to build those solutions that we will be ready to convert their space, manage it, and do a good job making it commute worthy as well.”
Flex space might still be new and different for some CRE teams and tenants. It requires collaboration in order to plan for a building’s layout adjustments. This is where technology comes in. There are technology solutions available for flex space management and for general space management to make it easier for property teams to meet each individual tenant’s needs.
Want to hear more from experts like Tim Curran? Watch the full webinar on-demand.
What is flex space in commercial real estate and how can it help the office sector?
The CRE landscape is shifting. The impact has resulted in properties stepping up their management by helping tenants create their own flex space offerings. The extra efforts and investments that come with establishing these flex spaces support long-term strategies that not only impact the future of buildings but those who occupy them as well. In fact, implementing commercial flex space is a top way property teams can restructure their buildings to fit tenants’ changing needs and demands.
For more insights on commercial flex space along with other tenant opportunities for CRE properties to capitalize on, download the free report, “2023 State of Commercial Office Report.”