Society is rapidly shifting away from ownership in the traditional sense. We are moving instead towards a system of shared resources where we can get access to the things we need when we need them and someone else can use them when we don’t. It is no surprise that this schema is being applied to real estate, one of the most expensive and limited resources that we have.
Even though WeWork has dominated the flex space conversation recently, the growth of technique is undeniable. Even the biggest occupiers are looking at flex space as a way to prepare for an uncertain future. It is apparent that coworking is leading the charge in companies moving away from permanent long-term occupancy to flexible space. Today “temporary or flexible” is defined as anything under three years.
JLL has an interesting study circulating JLL Trends – Flex Space that suggests we will continue to see significant shifts in how space is being used in the near future. Right now, flex space inventory accounts for less than 5 percent of U.S. office stock. In the future we believe that number will skyrocket to as high as 30 percent of the market by 2030. Think about it. When 30% of the office inventory is designated as flexible space and the term for the average office lease drops to less than 36 months there will need to be a supporting services of this new paradigm. At CORT we believe that furniture as a service is one of those services, critical to helping the flex sector grow and help the property industry adapt to a new world order.
We just completed a collaborative effort on behalf of Sierra Wireless and a sublease space they are working to fill. Atlanta based Joey Kline of JLL and I created a plan to leverage a Furniture as a Service (FaaS) solution. This space is now on the market and ready for the right tenant to move on in. We have learned that there are a number of important ways that flexible furniture can help buildings lease faster, be more useful and provide a better experience.
One of the ways that flexible furniture can help a building’s leasing team is by enabling the use of spec suites. Today leasing and management teams, supported by design professionals, create a plan to strategically outfit a vacant suite. The goal is simple. Create marketing opportunities and social media content, inspire physical tours, and present a vision for prospective tenants in how the space could look and function. All of this, of course, will hopefully help lease the space more quickly.
Flexibility is key here. FaaS allows for the new tenant or commercial real estate team to change the furniture, return it or a combination of both. Some tenants want to customize the space for their own needs and aesthetics while others just want the convenience of taking the office just as they toured it. In the end, the decision to create spec suites is now more attractive than ever because of the reduced risks associated with purchasing furniture that, in the end, may or may not be the best long-term strategy.
The war for talent is driving the need for flexible spaces to be hip. It makes sense. Hiring increases as the business grows. Employees have more options than ever and so the trend now leans towards leadership investing in comfortable temporary space. One big draw to modern tenants is what is being called swing space. This is space that offers a variety of options for workers, whether they want to relax on a couch, sit in an armchair or work at a window desk. The problem is that these spaces usually get furnished with a hodgepodge of random pieces of furniture. Usually the pieces that are overflow from all of the other rooms.
Recently Inspire Brands embarked on building a new Atlanta, GA headquarters. At the same time they experienced significant growth due to acquisitions and overall business success. Three temporary measures were required. Each one needed a different application of FaaS. The existing headquarters had to absorb a major uptick in occupancy. For this, furniture was literally added weekly utilizing every nook and corner. We had to get the density up to support the growth. At the same time, a co-working area was created. Using hot desking, Inspire was able to double the quantity of furniture provided in the rented offices. They also very quickly installed a large swing space to help with any overflow and make the tighter situation more comfortable. When the HQ was ready, all temporary furniture was picked up and the move was a snap.
Even with the added flexibility of FaaS, ROI is always important in justifying investments. In many cases, the average monthly cost per square foot for an office is between ¢.50 and $1.00 and varies depending on the need. These costs need to be weighed against the risk of having more of your money tied up in illiquid, depreciating, fragile assets like furniture. If there are unknowns or if change is on the horizon, purchasing just might not be the best option, especially as lease terms diminish.
With advanced technology furniture is also becoming a lot more than a place to sit. To help commercial real estate leaders evaluate the FaaS conversation we developed a division called Tapdn. This sensor based system that they provide collects data about how the workplace is being used. Armed with information our customers are able to make smart decisions about the future of their real estate portfolio, much like a recent project we did for Regions Bank.
According to Allison Ballard, Executive Director of Tapdn, “the workplace is evolving and we see the Tapdn platform as a way for our customers to effectively stay nimble and create environments that help employees accomplish their work, while providing objective data to appropriately plan for the future of their agile workforce. Technology allows us to meet our customers where their business needs are headed.”
I could not have said it better myself. As the needs of the office change we should look at different ways to embrace the change. An unpredictable business climate and an increasing use of shared space has meant that the modern office must be smarter, better designed and more flexible. In our minds, the same is true for the furniture that turns a room from an empty box to a workplace.