The commercial office flex space market is muscling its way into the future and a one-size-fits-all approach will not work for commercial real estate owners in the near future. Flex space will occupy 30% of the commercial office space market by 2030, according to a recent report by JLL.
While flexible space alternatives such as co-working space, incubators, and other short-term space options currently comprise a modest 5% of the office market, the demand has consistently grown at an annual rate of 23% since 2010, according to JLL.
In 2018, flexible space accounted for more than two-thirds of the country’s office market occupancy gains and the trend is far from a passing one according to Scott Homa, Senior Vice President and Director of U.S. Office Research at JLL.
“Our research and our conversations with corporate executives across the globe indicate that flexible work space is not just a passing trend—it’s woven into the fabric of the future of work. Even though some markets are better positioned for rapid growth, this still leaves significant runway for expansion across all U.S. office markets. We also expect to see a continued disruption of the traditional lease model as investors, occupiers and operators come to terms with a new—more flexible—way of business,” Homa stated.
Corporate occupiers drive more than 30% of revenue in the flex space market, and the number is expected to grow to 50% by 2020, according to JLL.
JLL found that the average flex space lease term for its clients is slightly more than eight months with inclusive pricing averaging close to $136 per square foot.
Factors driving tremendous growth are technological innovation and the changing workforce needs and requirements of corporate employers.
“Flexible space options allow workers and teams to select the right space to perform work each day in a location that will help realize their company’s mission and their own ambitions. This is one of the reasons we see so much runway for flex space in U.S. office markets – it addresses several core needs for employers and employees alike,” said Doug Sharp, President, JLL Corporate Solutions, Americas.
As this transition takes place, more building owners will need to remain highly adaptive and update their building’s digital connectivity architecture to suit the needs of corporate tenants.
Investing in cellular connectivity will play a vital role in enhancing workplace productivity and tenant experience, which are critical to the economic well being of commercial office owners.
By 2025, 80% of the world’s adult population will own a smartphone, and with the roll out of 5G, the next generation in cellular technology, connectivity will become a key driver of location for businesses, according to JLL. A combination of workforce changes and greater connectivity will enable a greater shift in real estate portfolios built around core hubs and fewer locations according to a report.
The convergence of technology in the workplace will ultimately result in a smaller requirement for space required to house a core workforce while driving demand for connectivity for an increasingly mobile offsite workforce.
As more smart buildings deploy Internet of Things (IoT) device technologies to maintain and monitor tenant and user experience, building owners will need to find a faster and more secure means of transmitting occupant and building data. Requirements for more bandwidth and data security and will lead to a higher adoption of cellular networks compared to much of the existing WiFi-based infrastructure.
5G, the next generation in cellular connectivity, will also play a critical role in deploying sophisticated artificial intelligence, access control, and the use of augmented reality-based applications in the workplace which have yet to be realized.