Is flex the future? A strategic guide for office landlords.
For office landlords, flex is firmly on the agenda. With vacancy rates for traditional leases high and rising, there’s compelling evidence that well-run flexible spaces can deliver better returns. Our modelling shows that cashflows from flex offer up to 30% higher returns after CapEx over a 10-year period compared to traditional leases.
However, before you rush to convert your entire portfolio into a world-beating flex empire, remember that one size doesn’t fit all. Every space has different physical characteristics, every brand is perceived differently by the market, and every office provider has a different relationship with its customers.
Weigh your options
As ever, detail is everything – and when it comes to fitting out and operating flexible space, the variations are endless. For example, you can choose to self-deliver or work in partnership with an established flex provider. Each has its pros and cons, and the right solution for you will depend on your attitude to risk, the location of your building(s), and your overarching reason for creating flexible space in the first place.
Pros and cons
While self-delivery offers you the potential for maximum cashflow generation, it also presents the highest risk. It leaves you in charge of design and layout, but your lack of flex experience may lengthen the sales cycle. You retain full control of the customer profile, but without an established brand and sales team, you’re likely to achieve lower desk/space ratios.
On the other hand, going the partnership route tends to speed up the sales cycle, but lowers your cashflow when market conditions are strong. The project needs less overall investment from you, but in exchange, you relinquish control of brand and design. Your partner’s established supply chains result in shorter launch times, but there’s potential for customer competition within your wider portfolio.
Secret of success
In a nutshell, every asset is unique and, while flexible space is no silver bullet, the additional premiums it can generate in the medium-to-longterm can turn many assets that are simply unfit for today’s traditional lease market into viable cashflow generators. The secret of success is the insight that comes from accurate, comprehensive information. Equipped with this, you can properly assess the risks and rewards for each asset at every stage of the decision-making process.
Ten pages of insight
We might say that the devil is in the data. As the largest global marketplace for flexible workspaces, The Instant Group provides data of unmatched breadth and depth that can transform the business fortunes of landlords, asset owners, and investors.
If you want to know more, read our latest whitepaper eBook that examines the potential of alternative office models. In 10 concise pages, we assess the benefits and risks based on real-world market data and revenue trends. For your free copy, please download it here.
