Presented By: Breather
In the Flexible Space Market, One Size Does Not Fit All
When the co-working concept was first introduced, it was to the advantage of the growing number of startups that were giving rise to NYC’s Silicon Alley, as those spaces served as much-needed incubators for the companies that had yet to graduate to independently leased offices. The success of companies in this line—most notably WeWork (WE)—helped to launch the concept of what we know today to be the sharing economy, which has given us such iconic brands as Uber, Airbnb and Rent the Runway, among an ever-growing list of others spanning dozens of business lines.
In the office market specifically, the sharing economy has resulted in the proliferation of what is known as the flexible space market—offices and meeting rooms meant for short-term use by individuals and companies alike. The flexible space market can be broken down into three primary segments, each offering a different product and value depending on the building and the clientele being targeted.
“When I’m looking to bring flex space into a building, my top priority is to determine which operator makes the most strategic sense, in terms of the amount of space needed and how it will be used—not every operator makes sense for every building,” said Michael Rudin, senior vice president of Rudin Management, which has worked with a number of flexible space providers, from WeWork to Breather. “When we’re introducing flexible spaces, we want them to be used by our tenants as well as others. It’s of the utmost importance to evaluate the existing tenant mix and long-term vision for the building, so we can ensure the operator we sign on is a fit for the most logical use of the space.”
Providers have also noticed a paradigm shift among office landlords. “Recently, we’ve seen landlords starting to view flexible workspace differently, as a way to attract new tenants and capture different users,” said Hank Jonap, director of real estate at Breather. “Tenants, meanwhile, are listening to employees and adjusting to today’s needs—they understand the that flexible space provides a convenient option and an overall space solution for today’s workforce.”
So, what is it that the various flexible space models offer? And, how can landlords and clients determine which is the best fit for them?
Co-Working: For the Young (Company) at Heart
The co-working model offers freelancers and startups the opportunity to share large spaces with a number of other companies with the goal of fostering a collaborative, creative and vibrant environment conducive to long-term growth. Champions of this model include the likes of WeWork, Regus and Knotel, which places a particular emphasis on providing companies with headquarters spaces.
These companies lease large floor plates and tend to be best suited to young companies that have not yet matured (or hired enough staff) to fill an expensive office. Typically rented on a monthly basis, co-working spaces are viewed as a long-term space solution. While this is the norm, it should be noted that there are exceptions to the co-working rules as more and more enterprise clients look to co-working space solutions for their business. This occurred most notably late last year in WeWork’s landmark deal with IBM to manage the tech giant’s 70,000-square-foot space at 88 University Place.
The primary advantage for landlords is that the co-working sector is one of few that is still hungrily leasing huge office blocks, making these operators the perfect fit for buildings where there is a lot of contiguous space available. On the flip side, these spaces have a high impact on building resources, including utility usage and foot traffic.
For co-working clients, these spaces can offer a great place to establish a footprint for growth that fosters a sense collaboration and camaraderie with other companies and offers well-designed spaces that would otherwise be out of budget. The disadvantage is that it can be hard to find quiet spaces to focus, as by nature co-working spaces are louder, more bustling environments than the typical office.
Offsite Meeting Room Providers: When You Need a Flexible Change of Scenery
The real estate industry took note of the offsite model in 2017, elevating the level of space and options available to companies looking for dedicated space to host team brainstorms, client meetings, small events, focused individual work, product sprints and spillover space. The leading operator in this space is Breather, which in 2017 saw more than 200,000 square feet added, taking its portfolio to 500-plus distributed meeting rooms across its 10 markets.These providers offer truly short-term solutions, secured and paid for on an as-needed basis, for durations ranging from one hour to a few weeks to several months. Breather notes that the sweet spot—so far, at least—is around one to two days at a time but continues to expand its product offerings.
While specialization in offsites is a more recent invention, the concept of hosting meetings outside of the usual office environment isn’t a new one. In the past, companies relied heavily on hotel conference rooms and restaurants to serve this function. But what the founders of Breather noted was that these spaces tended to be dark, outdated and lacking in consistency from one property to the next. Offsite operators were founded in answer to both the bustling co-working model and the outdated conference room options—providing a well-designed, quiet, tech-enabled space to focus that is completely private.
These providers lease smaller floor plates than their co-working counterparts, focusing on identifying niche areas in buildings where they can elevate the landlord’s offering in a low-impact way—serving as a building amenity that also provides revenue.
“While there is an audience for each flex space offering, what makes Breather stand out is our hands-on approach, our design and management of each space, which allows us to provide a consistent experience for our clients on a global level,” explains Jonap.
Peer-to-Peer: Making Use of Excess Space
The final piece of the flexible space puzzle has provided welcomed assistance to companies with excess space looking to offset their real estate costs. Peer-to-peer operators like LiquidSpace have, in a sense, become the Airbnbs of the office market.
As companies increasingly seek to consolidate space, and as the remote workforce continues to grow, firms are often left with unused space that can easily be monetized to help counterbalance overhead costs. These models allow companies to place their unused space on a centralized site, which individuals and companies can rent on an as-needed basis. Price points for these spaces tend to be lower than other options, though the quality of spaces being offered will vary widely, as will the level of privacy available.
“Each model has a place in the market, as this is not a winner-take-all industry. Companies can really take advantage of the flexibility to find what best suits their needs,” said Rudin.
Jonap agrees, noting that “by offering companies the chance to tailor their spaces to their needs, not just physically but through agreements which offer long term-flexibility without long-term commitment, Breather has created a truly flexible, space-as-a-service option for evolving companies, the value of which cannot be overstated.”