Landlords – here is how Coworking can feed your spec suites and total occupancy of your building!
The Great Resignation. Hybrid office solutions. Corporate downsizing of office space. Return to Office cycles. How can office landlords make sense of the uncertainty?
In our own informal poll of Commercial Office brokers, the feeling is that while the tide to returning to the office is gradually building it isn’t going back to “normal”. In fact, thanks to space aggregator, Hubble, here is a list of major corporations who agree that 5-days-a-week-in-office is no more.
In response, many landlords are taking their increasingly vacant floors and offering spec suites. The ideal is between 2,500 and 4,000 s.f. to accommodate smaller headcounts, hybrid work schedules, and hot desking where prop-tech is deployed for scheduling. Creating these suites allows tenants to visualize the finished product AND move in quickly and easily. Lease terms are shorter (even 18 months) and the build-out cost for the landlord is low-risk: If a tenant moves out, it’s the cost of carpet and repainting; if a tenant needs to expand, simply relocate within the building or remove some drywall.
This overlooks a major feeder to the Spec Suites: Coworking and Flex Office.
Here is How Coworking can Feed Spec Suites and Total Occupancy of your building.
Sample stack plan of 8-story mid-rise commercial office with 15,000.s.f. floor plates
Coworking feeds the Spec Suites
Using this sample stack above, we describe fitting out the first floor for 30% coworking, 60% flex or private, individual offices and 10% for events over a total of approximately 10,000 s.f.. The remainder of the first floor allows for cafe/restaurant at 5,000 sf.. to serve the building.
The second floor is dedicated to larger flex offices (up to 3 people) and several spec suites varying in size from 2,500 s.f. to 4,000 s.f. to accommodate companies from 10 to 20 people. The infrastructure for the first two floors can be managed by a team of 2 to 3 people as occupancy, memberships and events grow.
As the coworking/flex office members’ businesses grow, they can easily expand into the spec suites and continue to grow directly within the building, making business disruption minimal and retention high. Further, the spec suite members have access to all the amenities of the coworking space that they’ve grown used to, including meeting rooms and a larger community/café space. As a result, they do not have to incorporate a private conference room in their suite, saving the cost of space that would not be used on a full-time basis.
The Virtuous Cycle: Spec Suites feed the Small Biz and Satellite offices
If you’re building spec suites anyway, incorporating a coworking and flex office business into the whole just builds on the momentum by creating a business community and destination. In fact, our projects with landlords begin with building the financial model to prove out that cost of construction for the first two floors is balanced by above-market rents that can be charged compared to the rest of the building. These superior rates are based on providing an all-in, turnkey solution. Members can see the finished product, move in quickly and envision how they can grow within the building. Businesses are willing to pay more for convenience and flexibility.
Coworking and Flex Office is a Hospitality Play
And it takes time to effectively market and fill the space.
This model:
- Acts as incubator for businesses to grow within the building
- Can be managed as a single business based on the common infrastructure
- Tenant transition is easier and turnkey
- Leading to higher retention!
The advantage to landlords is that the use of coworking and flexible office is more timely and awareness is high. It is a prime time to explore beyond spec suites and include coworking and flexible workspace into your building.
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Landlords and Developers – You can explore more about our solutions, starting with Financial Modeling. To learn more about our financial model, schedule a conversation today.