How 'Fixed-Flex' Space Could Be The Future Of Office
Americans are finally returning to the office, but at many companies, it isn't the same office they were working out of 18 months ago. Some employees have grown accustomed to working from home and others are flat-out refusing to go back to commuting to the office everyday. This has left office building owners and companies wondering what the future holds for the American workspace.
“Companies are pretty unclear about both their headcount projections and the role of their various workplaces going forward,” said Craig Loeber, director at Industrious, a workplace-as-a-service operator. “They’re realizing that their old portfolio compositions may not match their future needs and are now looking for creative alternatives.”
Loeber said that as a result of these new workplace dynamics, Industrious has seen increased interest from large tenants that are experimenting with how they can use Industrious’ unique capabilities to solve new challenges across their own portfolios.
Loeber said that from day one, the mission of Industrious has been to deliver the best day at work for the individual employee, whether they work for a small startup or Google. Doing so requires an obsession to service within its spaces and also a sustainable growth model that enables it to truly be wherever its customers need it to be. To achieve the latter, the company made a shift in 2018 away from traditional lease agreements and toward partnerships with landlords and deal structures that give it the ability to scale much more quickly than competitors and more tightly align it with owners.
Now, Loeber said, companies are taking advantage of what Industrious has to offer and are using the company as a workplace-as-a-service tool that they can insert directly into their portfolios.
"We're moving away from being just a network of coworking spaces and toward becoming a true service provider, which is really exciting," Loeber said. "In working with large occupiers recently, we’re finding that many of the concepts our industry has thrown around since the start of the pandemic — hub-and-spoke, on-demand, etc. — are truly starting to take hold. One of the most exciting ways we’re seeing this transition play out recently, though, is through a solution we’re referring to right now as fixed-flex."
At the core of fixed-flex is an acknowledgment that flex space is just one of a company’s many workplace solutions. To be really effective at scale, it must fit seamlessly into the rest of the portfolio puzzle — particularly the traditional lease, which Loeber said will likely remain the predominant method for leasing real estate.
Industrious is hungry to grow very quickly alongside both occupiers and owners, Loeber said, and fixed-flex is an approach through which Industrious partners with a given landlord and a company with a large headcount requirement to blend traditional and flex space into a single, integrated solution for the company.
Loeber gave an example of a Fortune 500 consulting firm in a major U.S. market with 500 employees. The company has occupied five floors of a building for the past eight years and its lease is rolling in two years. The company wants to stay in the asset but is expanding as a group and unsure of how many people it will employ in the next few years — it could be 700 or it could be 1,000.
“What companies like this used to do is say to their real estate team and their brokerage team, ‘OK, we're pretty confident that we're going to have 700 people here for the next seven to 10 years, so go sign me another floor or two floors of traditional space,’” Loeber said. “Then, a company would sign a long-term lease, incur all those lease liabilities, and if it got it wrong or had too much or too little space, it would just have to deal with it down the line.”
In other words, the company was basically paying for its uncertainty. But Industrious presented an alternative: Continue to pay for the five floors that are currently home to 500 employees, and then Industrious partners with the landlord to deploy large-team, brandable flex space within the asset. This space would be suitable for 20 to 200-plus people, and the company could license it from Industrious on a short-term basis and flex into and out of it in real time.
He gave another example of a Fortune 500 Industrious client that was looking to relocate recently. The company has 250 employees today, but it is uncertain of what its size will be beyond the next three years. Pre-coronavirus, it likely would have signed a 10-year lease on a space that could fit all those individuals with plenty of extra room for growth and eaten any additional cost for unutilized space.
Instead, the company turned to Industrious to explore alternatives. The two groups were able to go to market together and find a shortlist of assets the occupier was excited about that had owners who were prepared to partner with Industrious to deliver a blended fixed-flex solution.
"The focus is to coordinate across the owner, occupier and operator to align the design and delivery of the Industrious space with the culture and branding of the company’s long-term space," Loeber said. "When done right, it should be difficult for an employee to tell when they’ve left the traditional office and entered the Industrious space."
Looking ahead, Loeber said that these two scenarios will become analogs for how companies navigate structural uncertainty.
“We want to help move real estate from a cost center of a business to a real value creator and competitive advantage,” Loeber said. “Doing so requires world-class service and unique, blended real estate solutions like this that companies can roll up into their own future portfolio strategies. Service and real estate partnerships are two of the core pillars of Industrious, and we’re excited to see these solutions help get people back into the office.”
This article was produced in collaboration between Industrious and Studio B. Bisnow news staff was not involved in the production of this content.
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