Are Offices With Flex Space More Valuable?

Office buildings with flexible space options could hold a higher value. A new report from CBRE looks at recent office transactions, and found that 40% of buildings with flexible space traded at a higher value than the average office building in the market while 52% of buildings traded on par with the market average.

“The presence of flexible office space is correlated with better pricing and higher value in some properties but not all. Those that have achieved more favorable results are typically smaller, older buildings in hot submarkets with strong real estate fundamentals driven by job growth, especially in the tech sector,” Julie Whelan, head of occupier research for the Americas at CBRE, tells GlobeSt.com. “In these markets, the presence of quality flexible space operators can contribute to a more modern building aesthetic and help attract and retain tenants, making these properties more appealing to investors than other nearby class-B options. If the landlord enters into partnership agreement with the flexible space operator, it could even lead to increased cash flow.”

Often, a presence of flexible space is most common in newer or renovated office buildings, and that could account for the boost in pricing among some of the properties. “At the very least, flexible space operators are improving the quality of the space that they lease through a more modern workplace design,” adds Whelan. “This design typically infuses activity-based workplace concepts with a residential-type aesthetic. The more space an operator leases in a building the more influence they may have over renovations in the exterior and common areas of the building. The physical renovations of course add value to the building along with the tenant attraction that the aesthetic and subsequent amenities provide.”