Presented By: Essensys
Office Landlords Need Holistic Approach to Prosper in Flex Space: Report
In-depth interviews with global landlords and enterprise tenants reveal the demand drivers for flexible space and the business benefits for occupiers.
A new report, conducted by independent market research firm Verdantix, shows multiple disparities between the flex space services and capabilities required by occupiers and those offered by landlords. These differences present a tremendous growth opportunity for landlords willing to invest in the most heavily sought flex capabilities.
The study, commissioned by essensys, the leading global provider of software-as-a-service and technology to the flexible workspace industry, included perspectives from global landlords with properties totaling 2.5 billion square feet as well as from major enterprise occupiers, including American Express, Unilever and Honeywell. The research concluded that only 13 percent of tenants felt that landlords were strongly positioned to meet their flex space requirements.
The largest and most impactful disparity concerns digital infrastructure, with only one-third of respondents considering themselves “fully satisfied” with the data security they had seen offered with flexible spaces.
Part of the problem has been that digital security was not often regarded as a priority in the flexible space world until recently.
“Like coffee shop Wi-Fi, Wi-Fi in flexible spaces was treated like a poor cousin of Wi-Fi in traditional spaces. The same attention wasn’t given to security,” said James Shannon, chief product and technology officer at essensys. “That will not fly in the new world, where flex is becoming an integral part of an enterprise customer’s space arsenal. They have the same exacting demands of flexible space that they would have had traditionally with corporate real estate.”
As such, landlords offering flexible spaces need to take a detailed and thorough approach to network security.
“They need to think about the whole hierarchy of security needs — everything from physical access to network security to digital security,” Shannon said. “Within a flexible area of the landlord’s building or in a traditional space, not only should the experience be consistent in terms of how I log into the network and how I access the space, but it also needs to be just as secure. It’s really important that landlords check the boxes that enterprise customers are demanding.”
This intense level of connectivity enables the holistic experience that modern-day occupiers expect not just from technology, but from the entire office experience.
“Occupiers wanted convenient booking options, touchless access, links with local restaurants — all the things that make a premium experience convenient or seamless,” said Ibrahim Yate, an industry analyst with Verdantix, who also conducted the interviews. “Dedicated flex operators had a better handle on these requirements and were more in-step with customer expectations.”
It’s essential, therefore, that office landlords who are unaccustomed to flexible offerings begin to think not just of offering additional services, but of embracing a bold new way to perceive their role in the landlord-occupier ecosystem.
“It’s not just about flex in their portfolio. Landlords have to think about their entire portfolio and how to become a flexible landlord — not just about the five, 10 or 15 percent of the space that might be flex,” said Jeremy Bernard, CEO, North America for essensys. “They need to think about activating their entire portfolio, so that tenants can occupy more than just the four walls of a space. It’s about how tenants can leverage the common areas in another building across town, or a building in another city. How can landlords offer that network to occupiers to accommodate their changing requirements?”
While software and technology are the pathway to this evolution, it’s not the only area where landlords need to match occupier desires. In addition to contract flexibility, which 66 percent of occupiers felt was either important or very important, frictionless set-up and configuration are seen as crucial to occupiers anticipating increasingly flexible office and business arrangements.
Occupiers stated that the greatest operational benefits to using flexible space are “ease of reconfiguring existing space to make it flexible” and “ease of moving into and beginning use of space.” These are viewed as being so essential that, the report states, “half of occupiers want unlimited options to make changes to the space layout and half wanted occasional changes.” By contrast, only a quarter of landlords found “minimal move-in requirements” to be very important, and only 33 percent gave “seamless building access” that same rating.
On a similar note, 73 percent of occupiers felt that space-use analytics was a top-three operational priority for them, while only around 30 percent of landlords believed it to be a high-impact technology in flex spaces.
While many landlords are missing the mark in terms of meeting some basic occupier needs regarding flex space, this isn’t entirely problematic. It means that there’s a vast opportunity for landlords willing to do the work to catch up.
Over half of the occupiers surveyed said they would pay a premium of 20 percent or more for flex space with tech-driven amenities, stressing “strong connectivity, data security, seamless access, and ease of move-in as well as layout adaptation.”
“It does require a different way of thinking,” Yate said. “It’s all about the data or the insights you have, and the ability to satisfy new criteria. If you’re offering flex space to customers who are concerned about data security, maybe you could get an accreditation, or you could work with a software vendor who has proven experience doing that. If you could meet that criteria and get the right people on board, then you can win the market.”
As hybrid work arrangements find their post-pandemic level, offering flexible space with the amenities and technology that occupiers require will be a “huge competitive advantage” for landlords, said Shannon, and getting this offering correct could create a new division of haves and have-nots among office landlords.
“We’re in a world where ‘flexibility’ is the watchword and time-to-occupancy has huge sensitivity,” Shannon said. “The most forward-thinking landlords connect their buildings with all the software and technology they need to react quickly, and minimize time-to-value when an opportunity comes along before they have a single tenant or occupier in the building.”