Occupiers are adopting a hybrid approach to office space that includes both direct leasing and flexible office space, and this approach is likely to be the future of office leasing. According to a recent report from CBRE, flex office space is here to stay, and while it currently only takes up a small portion of the total office market nationally, CBRE forecasts this two-pronged approach will continue to be popular among occupiers.

"Flexible office space leasing currently only accounts for about 6.5% of leasing nationally," Julie Whelan, head of occupier research for the Americas at CBRE, tells GlobeSt.com. "For comparison, the tech sector represents 26% of leasing nationally. We expect occupiers to continue to directly lease traditional space for portions of their headcount that are certain, but we suggest that the more volatile portions of their requirements may be better served in flexible space."

Formulating a balanced strategy is really the key here—rather than just marrying direct and flexible spaces. "Flexible office space should be seen as complementary to traditional office space and perhaps even as bringing additive demand to our office markets in some instances," says Whelan. "The only tranche of the traditional market that we currently see declining from a traditional lease standpoint are those deals below 5,000 square feet—requirements, which are often better served in flexible office space."

This demand and push to include flexible space has also been the catalyst for landlords to lease to and include flexible providers in their buildings. Where landlords were once hesitant to lease to flexible operators, most have come around. "To the extent that landlords are seeing occupier demand in their markets for flexibility, they will continue to embrace new space models to provide it. A risk vs. reward equation is part of every landlord decision," says Whelan. "If landlords believe their reward will be greater by engaging with new models, such as partnership arrangements, then these will proliferate in the market."

In some cases, landlords are even partnering with these providers, giving greater insight into what the future of office space may look like. "I think landlords that have engaged with flexible space operators so far have done so with cautious optimism, generally maintaining limits on how much space they are willing to dedicate to this model," says Whelan. "The risk profile of operators and the caution and limits exhibited by landlords will likely be taken even more seriously as we enter 2020."

Instant Insights /

Future Office Strategies Will Include Both Flex and Traditional Space

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