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Shifting CRE Portfolios: Why More Landlords are Incorporating Flex

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Commercial real estate (CRE) is undergoing a transformation. With changing work trends and evolving tenant needs, landlords are looking for new ways to stay competitive. One of the most significant shifts in recent years has been the integration of flexible workspaces into ‘traditional’ CRE portfolios. 

The rise of flexible workspaces

Flexible workspaces are revolutionizing the way people work. They offer tenants a range of options when it comes to working environments, catering to the needs of a modern workforce. These spaces are not just about providing a desk and a chair: they provide all sorts of services and amenities that help people run their businesses more effectively. From high-speed internet to helping with accepting mail and guests, flexible workspaces cover everything a business needs to succeed.

For landlords, flexible workspaces offer a new way to diversify their portfolios and increase their yields. By incorporating these spaces into their properties, landlords can attract a broader range of tenants, from startups and freelancers to larger companies and enterprises.

What’s driving the demand?

The rise of remote work means more people are working outside of the traditional office environment. This also means an increased demand for flexible workspace options. Employers are also looking for more flexibility regarding their office needs. With ever-changing team sizes and project-based work, fixed, long-term leases are becoming less feasible. Flexible workspaces provide a solution to these challenges, offering tenants the ability to scale up or down as needed. 

Most importantly, employers are fighting the war for talent by providing workspace experiences that their employees find genuinely beneficial. These workplace experiences are—more often than not—found in flexible workspaces, offered by a highly-trained team that offer everything from weekly networking events through to barista-made coffee and a dedicated concierge.

How flexible workspaces are changing the CRE landscape

This recent rise in popularity means landlords are now starting to see the potential of incorporating these spaces into their CRE portfolios. By partnering with flexible workspace providers, landlords can offer their tenants access to a range of flexible workspace options, without having to invest in the infrastructure themselves.

 Flexible workspaces are changing the way we think about commercial real estate. With the rise of remote work, demand for traditional office space is decreasing. Flexible workspaces offer a more cost-effective solution that is better suited to the needs of a modern workforce. 

As the demand for flexible workspaces continues to grow, landlords and property managers will need to adapt to this new reality. Those who are able to provide their tenants with the flexibility and amenities they need will be well-positioned to succeed in the changing world of work.

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Why are landlords incorporating flexible workspaces in their portfolios? 

Diversification and risk management

By adding flexible workspaces to their portfolios, landlords can diversify their risk. They can cater to a range of tenants and industries, from freelancers and small businesses to larger companies, which can reduce their exposure to economic fluctuations and market downturns.

They also offer a unique opportunity for landlords to experiment with new business models and revenue streams. Most flexible workspace providers offer a range of partnership models, from white label solutions through to complete fit outs and management of a space, depending on what works best for a landlord. 

Improved tenant retention and satisfaction

Tenants working in flexible spaces appreciate the range of services and facilities available to them, leading to increased tenant retention rates and alleviating the burden of finding new tenants every few years.

Flexible workspaces also provide a sense of community and belonging that traditional office spaces often lack. By hosting networking events, workshops, and social activities, tenants can connect with each other and build meaningful relationships. These community-building initiatives are often managed by the flexible workspace provider, taking the responsibility away from both the landlord and tenants. 

Maximizing space utilization and revenue

Flexible workspaces enable landlords to maximize the use of their available space. Shorter, more flexible leases cater to tenants who only need space for a short amount of time, thereby optimizing revenue streams and providing a more predictable cash flow. This means landlords can optimize revenue streams by filling vacant space at a faster rate. 

By nature, these workspaces are designed to be multi-functional, not only offering desk and office space but also providing meeting spaces, event spaces and workshop spaces. This can potentially generate additional revenue for the flexible workspace provider, and in turn, the landlord. 

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It’s clear that the integration of flexible workspaces into commercial real estate portfolios is a growing trend that offers many benefits to landlords when done right. If landlords want to succeed in this new era of commercial real estate, their office stock needs to have a competitive advantage – and partnering with flexible workspace providers and being flexible and responsive to tenant needs is a sure way to do it. 

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About Author

Brad Krauskopf is the founder and CEO of Hub Australia, Australia’s largest privately held coworking space provider, providing premium spaces to growing businesses across the country. Hub Australia has seven locations across Melbourne, Sydney, Brisbane and Adelaide, supporting over 3000 members and businesses.

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