A missing link in flexible workspace offerings – and why landlords hold the key.
Occupiers are increasingly telling me of their need for a wider range of office products - highlighting market gaps. One important gap is the availability of self-contained, fitted-out and serviced suites that can be taken under a licence (not lease). This product sits between a traditional spec suite and a large serviced office suite. Let’s call it the managed suite.
So, if there is such a demand for managed suites why are they scarcely a product category in most countries?
It’s because the primary innovators in office space product are not asset owners but coworking operators – and managed suites present a set of risks that are not well suited to their business model. Compared to coworking space, managed suites tend to achieve lower pricing per unit of area which, after allowing for inevitable vacancy periods and the cost of lease commitments, make the likely margin insufficient to meet the risk-reward profile expected by coworking operators’ investors.
So, who is best placed to initiate this important product category?
We think it is the landlord.
Landlords have lower capital and holding costs, managed suites are a natural extension of their traditional businesses, and they stand to benefit most from enriching the asset customer’s experience.
The simplest pathway to delivering managed suites is by either:
1. Landlords extending - or replacing - their spec suite offering by incorporating a greater range of services (utilities as a minimum) and making these available under flexible terms and in a price range between spec suites and coworking. These might be self-managed or managed by a CRE services partner, or
2. Coworking operators delivering managed suites on behalf of the landlord under a management agreement, ideally in concert with a full range of flexible workspace products, including meeting rooms and coworking.
Ultimately, we suspect managed suites will largely replace the role of spec suites as we know them.
Each pathway has pros and cons. Either way, landlords are the rightful instigators of this important product.
