Office landlords are entering the co-working market, offering prospective tenants flexible space option, and they are quickly becoming a top competitor for co-working operators. According to research from CBRE, 40% of office lease transactions that included flexible workspace amenity are valued above the market average. Landlord-owned co-working models include CBRE’s Hana and Brookfield’s partnership with Convene.
“Landlords realize the way people work is undoubtedly changing, and changing rapidly,” Patrick Amos, SVP at CBRE, tells GlobeSt.com. “This transformation stems from various cultural shifts and is largely being driven by technology and the arising need for and use of flexibility. As the co-working landscape becomes ever more competitive, flexible space operators modify and enhance their offerings from simply space and services to a more comprehensive suite of workplace and lifestyle offerings. Landlords know that co-working is now an amenity that appeals to various tenants for various reasons and are trying to expand on that by offering services provided by an operator as well as amenities provided by both the landlord in collaboration with an operator to cater to all tenants at a property.”
This is a new trend, and while flexible workspace offers a wide-range of benefits for office users in general, but it is hard to say if these users prefer co-working operators or if a well-built in-house model will be equally as popular. Amos says that it is too early to tell if there is a preference. “In Los Angeles, one of the latest trends are hybrid, management contract-style agreements between major co-working operators and landlords at large projects,” he says. “One of the first of these in the area is the agreement at Playa District, formerly known as Howard Hughes Center, between EQ Office and Industrious. Landlords have seen co-working be successful and are contemplating these “partnership” deals to expand on these flexible space initiatives that are so attractive to the companies and their employees today.”
Either way, flexible office space has become an important aspect of the office market, and competitive landlords will see it as a necessity. “It provides property owners with an added ability to directly provide custom, agile spaces without having to rely on third-party providers,” says Amos. “But no matter which way you go, today’s landlords view co-working spaces, in whichever form, as an amenity and differentiator to drive leasing overall at their property.”
The demand for flexible workspace, both from co-working operators and in-house, landlord-owners models, is only going to grow. It is likely that more landlords will adopt some form of flexible workspace onsite. “When we speak with our large tenant clients, they always ask about co-working amenities at any given location,” says Amos. “Sophisticated users see the potential cost savings and added flexibility in having a co-working option on site to accommodate short-term expansion needs without the necessity to lease additional space on a long-term basis.”