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3 alternatives for CRE landlords to offer flexible workspaces

3 alternatives for CRE landlords to offer flexible workspaces

The demand for flexible workspaces has been growing steadily over the last year, as both companies and individuals learned to adapt to new ways of working. To keep up, landlords have had to explore ways to adapt to current trends to remain relevant. We have outlined the most pertinent reasons to do so in our previous article; however, the question remains: what options to offer flexible workspace are currently out there?

#1 Coworking Operator

The most common approach is to enter into a lease agreement with a coworking operator like WeWork, IWG, Mindspace, Unicorn (Germany), The Office Group (UK), or Industrious (USA). The operator signs a long-term lease with the landlord and subsequently subleases the office space through short-term contracts.

The landlord can benefit from the convenience of having a professional, known brand in their building and the long-term, steady rental income. However, there are clear downsides to it – not only are landlords losing control over the space, but they can also put themselves at risk due to the impact the COVID-19 pandemic has had on rent revenues.

Additionally, the operator will ask the landlord for the CAPEX investment needed to transform the office space to match their fit-out and design. As the property is managed on behalf of the operator, other occupiers do not enjoy an upgraded tenant experience, and the landlord does not benefit from the profits.

#2 DIY

Alternatively, a CRE landlord could consider starting & operating their own flexible workspace brand. The most significant benefits are that all tenants in the building can profit from an upgraded tenant experience and that the landlord controls the P&L. Additionally, the landlord is the sole decision-maker on the design and the CAPEX investment.

Although there is no fixed rental income guarantee, dividing the space into different ones can suit a more diverse tenant base. In addition, the flexibility and extra services justify a higher rental price, generating a revenue income of up to 30% higher than a traditional lease.

This choice might sound like a no-brainer, but offering a flexible workspace is not easy. The landlord would need a dedicated team of community managers, marketing & sales, IT, and the expertise of operating a flex brand, not to mention software to support the invoicing, occupancy administration, community building, and more.

#3 White-label flexspace-as-a-service partner

The third option offers the best of both worlds: a service partner with the expertise, team, services, and software to operate a flexible workspace successfully under the landlord’s brand name while remaining in complete control of CAPEX and rental income. Most importantly: all tenants within the landlord’s office building profit from an improved tenant experience, as more and better services become available, all contextually embedded within the workplace through the digital layer of office buildings.

The white label flexible workspace management partner (like infinitSpace) creates a business case based on their experience and local market research. Then, after an in-depth review, the landlord and service partner sign a long-term agreement in which all matters are mutually agreed upon, including the CAPEX investment.

While there is no guaranteed rental income, the flexible workspace partner should be incentivized to reach maximum occupancy. A management agreement based on revenue or profit share will encourage the partner to continuously improve their performance.

What’s the conclusion?

As the way we live and work continues to change, workspaces too have to adapt to fit the requirements of the new era, with a strong emphasis on flexibility and customizability. With both unicorns and corporates adapting their office portfolio, it is predicted that more than 30% of the current office market will consist of flexible options by 2030. Thus, landlords that can keep up with the trends and start offering their own flexible workspace brands are the ones that will be able to remain relevant and thrive in the upcoming years.

InfinitSpace aims to make it easier than ever to find flexible solutions to current challenges. As a white-label provider, we fully adapt to the landlords’ requirements concerning design and operations while running the space under their brand.

Interested in our solutions? Would you like more information or expert advice? Get in touch with us.

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