Suburban Office Stalwart Launches Flex Office Brand In 5 Cities
A nationwide owner of suburban office properties is rolling out an in-house flexible coworking operation to try to take advantage of the shifting nature of the workplace.
Bridge Commercial Real Estate — the Atlanta-based subsidiary of Bridge Investment Group — is opening an initial 158K SF of flex office space in five metro areas. The spaces are geared toward big companies wanting suburban stopovers for their employees.
Named Abridge, the flex office program is expected to grow to 1M SF across Bridge's national portfolio, which spans more than 14M SF of office space in more than 100 properties in 15 states.
Bridge Commercial CEO Jeff Shaw said the company is hoping to lure big tenants that want smaller locations with all the trappings of coworking, including a central open-space hub and café offerings for employees, without having to sign more than a year's lease.
“What we're trying to do is solve for enterprise users who are trying to protect their own brand, but have some of the same needs that coworking has solutions for,” Shaw said.
In Atlanta, Abridge is initially being established in 20K SF spaces at two of Bridge's eight area properties: 1277 Lenox Park, the former AT&T buildings in Buckhead, and The Dupree, off Interstate 285 in the Cumberland/Galleria office submarket. Each location can accommodate up to 246 desks, Shaw said, with individual offices branded to specific companies.
Bridge also is opening Abridge locations this summer in the suburbs of Miami, Washington, D.C., Dallas and Minneapolis. The locations will be at Flagler Station, a four-story office building in Doral, Florida, a 255K SF office building in Reston, Virginia, called Makers Point, Tower 1320 in Irving, Texas, and West End Office Park, a six-building, 560K SF campus in the Minneapolis suburb of St. Louis Park.
Shaw said demand for suburban office properties has remained strong, even during the coronavirus pandemic. Companies are exploring a hub-and-spoke model in light of the pandemic, allowing some employees to work closer to their homes while still being in an office, Shaw said.
Microsoft has this model in Metro Atlanta, Shaw said. While it is opening a new urban office at Atlantic Station and plans to develop a corporate campus in West Atlanta, the tech giant also has a major office operation in suburban Alpharetta, some 25 miles north of the city. That is how Microsoft is able to attract talent from a wider swath of Metro Atlanta, Shaw said.
“They're also trying to get that talent from those who want a dog and fence and live out in the suburbs,” he said.
Fewer companies, even large ones, are looking to commit to office leases that typically can last a decade or more.
“If you look at the behavior of cycles and you look at the last couple of cycles in Atlanta, whenever you're seeing uncertainty, businesses tend to want to be safe. They want to minimize risk,” Shaw said.
While larger companies — known as enterprise customers in the coworking world — still make up a minority of flex office users, they are a growing segment of the industry, said Bill Bennett, the founder and CEO of the coworking operator Expansive.
“Enterprise companies, they're picking their HQ and that's going to be their main thing. They've been on a trend of outsourcing their other real estate, because they've been finding it to be a better solution,” Bennett said.
Bridge isn't the only landlord getting into the flex office and coworking act. Office giant Tishman Speyer got into the business in 2018 with its Studio concept. In Atlanta, Lucror Resources transformed all of Downtown Atlanta's historic Flatiron Building into its own coworking operation.
Other major office landlords are looking at providing more flexible lease terms to assuage that leasing uncertainty plaguing the market today. Highwoods Properties Vice President Jim Bacchetta told the Atlanta Business Chronicle last month that the office landlord was exploring its own version of flexible office in its portfolio.
“We are actually designing smaller spaces for shorter lease terms,” Bacchetta told the paper. "We are not going to compete head-to-head with coworking, but we are going to compete in the arena for the smaller users, who just aren’t willing to sign longer-term leases.”
Operating one's own flex office space, rather than leasing to a coworking operator, has an appeal for some landlords with the industry upheaval last year. According to a January report from the coworking listing site Upsuite, 1 in 5North American coworking locations either closed down or changed hands in 2020, leaving landlords to deal with a 25M SF fallout.
There is still risk for landlords striking out on their own with coworking, said Jamie Russo, the founder of Everything Coworking and the former CEO of the Global Workspace Association.
“It's really not generally in the wheelhouse of the landlord,” to think more like hotel operators in terms of service, Russo said.
Shorter-term leases also mean landlords are facing much more tenant churn, and are having to prospect more often to replace tenants that leave.
“It's really about marketing. There's high churn for members, so you have to be able to do customer acquisition every day, not every five years. That's the biggest risk,” Russo said.
But there is growing interest among big companies to add coworking and flex offices to their footprints, Russo said, especially as a hub-and-spoke model becomes a middle ground to bring their employees back to the office.
“I think it can work. And I think it makes sense that [Bridge is] doing it because the suburbs are now the place where people want to work three days a week, two days a week,” she said. “I give them a high-five for sort of moving to where the market is moving, because there are a lot of landlords who sort of have earmuffs on [and believe] this is not happening, it will sort of go back to normal.”