Companies worldwide are grappling with unprecedented changes in workforce behaviors as employees’ have a strong desire to retain a certain level of flexibility in how and where they work in a post-pandemic world. Business leaders are now looking into how to best accommodate employees’ expectations and ensure the productivity and well-being of their teams.
Switching to hybrid work models, where employees spend time working from home and an office, has driven traditional space requirements down for many employers. “How much office space do I need for my team?” “Where will we work and for how long?” These are just two of the questions that are top of mind for tenants as they contemplate return to work policies. Corporate occupiers with multiple leases, such as Yardi, are now evaluating their lease portfolios and business needs to determine whether to make the switch to flexible or coworking options for their workplaces. What do flexible offices look like?
Flexible Offices: What Are They?
Flexible workplaces accommodate the needs of tenants seeking shorter leases and greater agility while guaranteeing the comfort and resources necessary to complete their work. By providing a workplace when and where tenants need it, flex spaces ensure productivity and efficiency as employees begin returning to the office.
Flexible workspaces can come in the form of hot desks, coworking spaces, open offices or dedicated desks. While hot desks allow users to book a workspace whenever they need it, dedicated desks provide more constant users with the same workspace whenever they come to the office. Open office arrangements allow users to all work from a common area and often look like a long desk, while coworking spaces provide users with desk spaces, conference rooms and private offices to be reserved as needed.
From a lessee perspective, flexible offices can quickly scale up and down in footprint to accommodate changing business needs or can be easily rearranged to fit teams of different sizes. There are, however, advantages and disadvantages to both flex space and traditional offices. Here are some of the things to consider when deciding when and how to make the switch to flexible workplaces.
Manage Your Current Leases
Tracking your leases and staying on top of due dates and lease expiration dates is essential to determining what you should do with your office spaces. Managing multiple leases manually is both time- and energy-consuming. At Yardi, our current portfolio of 40+ leases is monitored using Yardi Corom, a powerful lease management software, that triggers timely automated notifications before lease expiration. These alerts are sent to stakeholders within the company who then analyze and evaluate space needs for that location and decide what the next steps should be. Seeing both traditionally leased space and coworking availability on the same dashboard gives you actionable insights into your space utilization and future needs.
Analyze Occupancy Rates
Whether flexible workspaces are a financially feasible solution for companies is determined by a thorough analysis of current lease expirations. In order to decide whether a lease contract is to be terminated or renewed, analyze the property in question and its current physical space utilization. Based on that information, project usage for the next given number of years. The occupancy management software from Yardi Corom enables companies to access relevant data on how desk reservations for the office space have been trending over time and how occupancy has decreased or increased for a given property. This criteria is essential in understanding whether renewing that same lease or opting for a different one is a more cost-effective option in the future.
The best way to determine whether to switch to a flexible office or consider a new long-term lease is to compare proposals and lease terms side by side. If the data gathered through occupancy management tools, such as Yardi Corom, indicates that the current lease is financially feasible, even with the changing dynamic of work, renewing with the current landlord may be most cost effective. If costs are within budget, and the terms are agreeable, renewing the lease and staying in a traditional office space might be the best choice. If occupancy data supports maintaining a traditional office space, but current terms are unfavorable, finding a new long-term lease may be a better option. Search for office space through CommercialCafe, which lists over 300,000 commercial spaces nationwide, and evaluate local rent rates using CommercialEdge. This would be an option for companies that find having a stable, private office long-term to be the most suitable option for their needs. Switching to a new contract for a flex space is another option for companies with low occupancy rates and that want to change the dynamic of their office space.
The best way to compare these options is to use a deal pipeline management tool. Yardi Corom offers transaction management software that compares the three scenarios above. Asking rents, tenant improvement costs, lease terms and all relevant proposal details can be viewed and analyzed side by side. This apples-to-apples comparison enables stakeholders to determine which option is best for their long-term business needs, predicted office occupancy and team productivity.
Enhancing Employee Collaboration via Flexible Spaces
With flexible offices increasing in popularity, finding the most cost-effective way to make the transition is essential. While there is no standard, one-size-fits-all solution, we believe that occupiers rethinking their office space needs should consider the following criteria when evaluating traditional office and flex space leases.
- Dedicated space needs for optimal productivity: reducing dedicated office space is a great way to accommodate the decreased occupancy rates of the last two years.
- Rent costs over time: reduced rental rates are another solution to ensure that future leasing is more cost-effective.
- Lease terms and options: renewing a lease may be a great way to negotiate costs and terms.
Another thing to consider is reducing the average lease term. Before the pandemic, terms could extend to 10 years, but tenants are now looking at leases expiring within two years. This shortened timeframe ensures companies can adapt to changes required by fluctuating occupancy rates while maintaining a dedicated office space.
Flex offices will likely be a dominant feature in the future. While rent may be higher for flexible spaces, saving in the long term is still possible due to the reduced square footage of the property. Many employees expect hybrid work arrangements that provide access to multiple office locations and the technologically advanced amenities that come with such spaces. Flex space features should enhance employee satisfaction and ensure the acquisition and retention of a larger talent pool.
Yardi Corom is a simple and comprehensive accounting, lease and workplace management solution for CRE tenants. Our cloud-based software solution allows employers to activate hybrid workplaces and desk hotelling, increases efficiency and accuracy across your entire lease portfolio: manage leases and subleases, track key lease data, centralize transactions and become FASB/GASB/IFRS compliant. To learn more, you can visit our website or schedule a meeting with our team.
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