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Strategic Spaces: Key Considerations for Landlords in Selecting the Ideal Location for Flexible Workspaces

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Finding a ‘prime’ location in commercial real estate is often considered the ultimate prize. Even more so when talking about workplaces.

Landlords can afford to charge tenants premium prices because the space comes with premium offerings. Office buildings in prime locations are part of an area that demands the best amenities such as hospitality, retail, and leisure. Amenities that command the attention of high-profile occupants, for example.

However, since the COVID-19 pandemic, the attitudes of both employees and employers towards working practices have changed. The discussion around flexible and hybrid working and the change in demand for how and where people work is never far from the news. As such, our beliefs about what constitutes a perfect location for an office space have had to change.

So, with that, let’s look at why landlords must keep an open mind when deciding the location of the next big venture.

Keep an open mind: weighing up advantages and drawbacks

It must be acknowledged that workspaces located in prime areas are still highly sought after. One of the more obvious reasons is that office spaces in prime locations can demand higher rental incomes. Buildings in these spaces are often surrounded by all the services and facilities that employees and business leaders demand – great transport links, restaurants and bars, and a multi-cultural demographic. All these benefits allow landlords to attract high-end occupants and, in turn, higher rental prices.

On top of that, the persistent demand for property in these prime areas means property prices increase, and the investment appreciates at a quicker rate. This ticks the box for landlords as it can future-proof their investment by not having to rely solely on instant rental income.

However, it’s not all sunshine and rainbows. The two advantages above can lead to difficulties in other areas. Landlords may require higher-than-normal upfront investment, which can be hard to find in the current climate of expensive borrowing.

Commercial real estate in these neighborhoods is also extremely popular, and the competition can be fierce. In order to maintain the much-needed high occupancy rate – and rental yields – landlords often have to press fast-forward on their marketing plans.

On the other hand, non-prime locations provide landlords, businesses and employees with different benefits, such as lower costs and increased space.

Many non-prime spaces are located on the outskirts of a city’s central business district (CBD). Therefore, the price of rent can be significantly lower than that of its prime location alternative. In today’s market, many small and medium-sized enterprises (SMEs) and startups must find ways to operate within a stricter budget, and non-prime offices may be the more affordable option. This allows landlords to attract a broader range of occupants and can help create a more reliable revenue stream.

Non-prime locations also have one major central point of difference: space. This space affords landlords plenty of opportunities to add amenities to their properties. Ventures such as car parks, event spaces, retail outlets, and restaurants can be installed, further boosting the asset’s value while allowing landlords to increase rental premiums.

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On a more human level, non-prime spaces can aid in employee wellbeing. In the modern workspace, much is made of employees having a more positive work-life balance, and non-prime locations play a major hand in bringing that to life.

A view of a commercial real estate landlord.

For example, real estate in non-prime locations is often much nearer to residential neighborhoods, leading to shorter, more convenient commuting times. Furthermore, non-prime spaces have become renowned for offering a superior setting for fostering a better working culture and retaining talent. For landlords, these attributes can boost tenant demand and occupancy rates.

That isn’t to say that non-prime locations don’t come without their challenges for landlords, either. For starters, the demand for spaces in non-prime areas can often fall short of the levels found in prime locations, meaning that on top of having to attract tenants with cheaper rates, landlords may have to channel more of their budget into marketing and acquisition in order to satisfy the necessary rental income.

Additionally, businesses and employees who are more people-facing and whose job requires greater interaction may be put off by the lack of convenient amenities, such as major transport hubs.

The essential points

Whilst every landlord will have their own particular set of circumstances and concerns to address when selecting a new location, choosing between prime and non-prime locations is becoming more challenging.

Prime locations still command a higher level of prestige, along with high rental income and a steady stream of demand, whilst non-prime locations offer a more rounded option with lower costs, a more stress-free environment, and the space to add valuable amenities.

This might seem like a lot to take on  for landlords, but they don’t need to tackle the decision alone. Landlords can partner with a workspace provider  whose knowledge and experience can provide valuable insight into market conditions, demand and strategy. Not only that, the provider can manage the project from conception to operation, providing landlords with another layer of security.

It would be naive, however, for landlords to think that merely selecting the most suitable location answers all their problems. Other crucial elements must be present to create a great workspace. Features such as high-quality fit-out, great transport links, and an excellent on-site team are all non-negotiables if landlords want to boast a premium workspace.

When choosing their next venture, landlords must keep an open mind to the advantages and disadvantages of every location and align their values and needs accordingly. In doing so, landlords can place themselves at the forefront of the future of workspace.

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About Author

Wybo Wijnbergen is the co-founder and CEO of infinitSpace, a company that enables office landlords to easily create and run a flexible office space under their brand and conditions. Prior to launching infinitSpace, Wybo was a Managing Director at WeWork, where he helped oversee the company’s expansion across Western Europe.

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