COVID-19 has drastically changed the relationship employees have with the office. When millions of professionals had no choice but to work remotely, companies and employees alike reconsidered what they need and want in an office setting.
While some organizations are tentatively looking to implement a full-time return to the office, many are embracing hybrid models or flexible policies that give employees more choice about where they work. This shift in work and office policies is inevitably having an impact on landlords and workspace providers. It’s become apparent that landlords need to embrace flexible strategies that make the physical and digital workplace effective, efficient and, more importantly, engaging, to stay relevant in a fast-evolving market. More companies are looking for dynamic, turnkey spaces and services that suit their requirements. Much of that pressure then falls on landlords to deliver the spaces both employers and their employees want.
Despite this reality, many landlords have been slower to adapt than their tenants. A recent study by independent market research firm Verdantix draws on 50 in-depth interviews with asset managers, owners and owner-operator landlords with combined office portfolios of more than 2.5 billion square feet, and heads of real estate at corporate enterprises such as American Express and Honeywell. They were looking to understand the real estate challenges and opportunities ahead for both landlords and occupiers. The research addresses the market trends driving the demand for flex space, the financial benefits for landlords that effectively provide flexible space and the key concerns tenants have with flexible space products.
In response to the most pressing market trends, 90 percent of landlord respondents said that tenants’ rising focus on productivity and the overall tenant experience was very influential. On a similar note, 60 percent of occupier respondents believe that supporting employee productivity through an enhanced occupant experience was the most important benefit of using flex space. Changes to indoor layouts and interior designs that do not resemble old office setups remain a priority. The study found that landlords must respond to changing tenant expectations around in-building experiences, from flexible design to flexible technology.
In the coming years, a flight to quality for office tenants will dominate the discussion about the future of offices. Many tenants will opt for the services and customizations of spaces that come with technology-powered turnkey flex offerings if given a choice between that and a traditional alternative with a long-term lease. The ability to condense or expand rented spaces as teams scale up—or even set up new offices in new regions that can be seamlessly integrated into a corporate real estate portfolio—will be differentiators for building owners.
Similarly, tenants—and importantly their talent—want frictionless environments where they can access everyday services, spaces and locations aligned with their needs (when they need them). The workplace is a major factor in attracting and retaining talent, and so employers need it to be digitally enabled and seamless. In the increasingly popular hub-and-spoke or distributed working model, an employee may work from the HQ office one day and a flexible workspace the next. Landlords, then, need to provide access to a fully connected campus of workspaces – whether in one city or across multiple regions. It’s about giving tenants flexibility, a consistent experience and easy movement across an entire network of spaces.
Technology that enables these experiences is key. According to the research, one of the top-of market trends driving demand for flexible workspaces is technology services that offer amenities and seamless access for tenants. Lease flexibility is another top trend: 86 percent of landlords said it was either an influential or very influential factor in driving growth for flex space. Coincidentally, tenants also rated lease flexibility as one of the most important market trends, with 66 percent labeling it as very important.
Historically, landlords have been wary of flexible leasing contracts and 87 percent of surveyed tenants believe this statement to be accurate. However, landlords must proactively find ways to reduce vacancies without lengthy fit-out processes. Lease flexibility in turnkey spaces is an elegant solution that makes a commercial building a compelling option for tenants in the long-term. When underpinned with the right software and technology, workspaces can be activated quickly and efficiently.
This ultimately goes back to the key factor at the heart of the future of office space: If there is a flight to quality underway, then landlords need to make sure that tenants see their buildings as premium. A renovated lobby and amenities are important, but a landlords need to be active partners for their tenants. This means having the flexibility to meet their evolving requirements one year or five years after the lease is signed.
Ultimately, the demand for flex space is driven by three main factors: a desire for shorter leases, interior designs that support all work tasks, and technology services that allow for seamless entry and access to amenities. The shift to flexible office space has become universal, and landlords must provide the services and office experiences that occupiers demand.
Jeremy Bernard is chief executive officer, North America, at essensys.