Whether working from the office, home, or somewhere in between, people have more than a few options these days. In the ongoing war for talent, employers are prioritizing flexibility as part of their competitive strategy.
According to JLL’s 2021 Global Flex Space Report, 41% of tenants expect to increase their use of flex space as part of a post-pandemic work strategy.
That’s why landlords saddled with low occupancy rates exhausted by an uncertain market believe they’ve landed on an innovative way to fill space: Team up with flexible space operators.
“Office landlords are increasingly looking for ways to incorporate flex into their portfolios, but there are significant risks to subletting that space to a traditional flex operator or taking on the management of that space themselves,” says Jacob Bates, Head of Americas Flex and Experience Management at JLL. “In the traditional model, there’s little to no control of the space and a significant risk of default by the operator, while the self-perform model has a higher output of capital and 100% of the risk.”
In some cases, landlords are stepping in to run the spaces under their own brands. More commonly, however, landlords are turning to management agreements with flexible space operators to take over space left by coworking providers that either went out of business or have scaled back their operations.
Instead, management agreements could become far more typical when flex-space operators share revenues with landlords. Of course, it’s still early days, but this has the potential to rapidly increase the amount of flexible space in the market.
Right now, most offices remain primarily traditional. But expectations are for flexible office space to expand rapidly over the next decade. JLL predicts 30% of office space to be flexible in some form by 2030.
“The shift to management agreements means the sector can grow quickly with the capital requirements spread across a greater set of partners,” says Ben Munn, JLL Global Flexible Space managing director and lead. “Management agreements can also align landlords and operator incentives, creating a mutually-beneficial partnership for all parties.”