A rising number of landlords are eyeing the flexspace market for its impressive revenue potential—but translating that opportunity into real returns requires a clear-eyed grasp of what makes a workspace perform. Unrealistic assumptions about occupancy, revenue and tenant retention continue to distort feasibility models across the market, according to Tashi Dorjee, head of flex at JLL.
"Occupancy is the most crucial facet of any flex feasibility model, but it is often sorely miscalculated," Dorjee told GlobeSt.com. "It is rare that a new workspace will launch at high occupancy."
In practice, most new flexible workspaces begin operations at about 20% desk occupancy and typically need 12 to 15 months to stabilize around 85%. Many feasibility models, however, underestimate ramp-up or assume faster demand growth.
"A consideration of ramp-up time is essential in any feasibility modeling, as early occupancy is driven by pre-leasing and marketing," Dorjee said. "If this timeline is ignored, then revenue expectations quickly become implausible."
That same precision is needed when balancing the workspace mix. Private offices play a crucial role in generating income, with an effective split of roughly 85% private offices and 15% desks, Dorjee explained.
Revenue projections from meeting rooms can also go astray. Dorjee noted that forecasts often assume heavy use of event and meeting spaces, whereas utilization rates closer to 25% are more realistic.
"While low, this average accounts for downtime between bookings, unbookable hours, complimentary usage by tenants, and seasonal demand patterns," he said.
"Operators need to ensure they make the booking process for these spaces as frictionless and secure as possible. All too often, it's either too difficult to reserve a room on demand or too easy for 'squatters' to access a room without paying for it."
With the right system and oversight, however, these spaces can still be profitable. Without that diligence, Dorjee cautioned, "potential revenue is being left on the table."
Tenant retention is the final piece often missing from accurate flex feasibility calculations.
"While early occupancy is often achieved through discounts and tenant incentives, long-term performance is dependent on retaining those tenants once these incentives expire," Dorjee said.
"Unstable tenant retention triggers fluctuations in occupancy levels and undermines any meaningful predictions a feasibility model can make."
Operators, he added, tend to overemphasize lifestyle perks like "game rooms" or "beer taps," when the true drivers of retention are reliability and ease of use—elements like dependable Wi-Fi and seamless access to meeting spaces.
When models account for realistic ramp-up periods, conservative meeting room utilization and genuine tenant retention, flexspace becomes a more predictable and promising investment class.
Technologies such as those from essensys now help landlords stress-test these assumptions. Its flex feasibility model enables building owners to explore occupancy rates, desk mix and revenue expectations before committing capital—allowing them to base investment decisions on data, not optimism.
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