Buildings of the future are powered by technology: Part 2

4 min read
15/06/2023
By Jenna Rorison

We asked Davey Friedman, Vice President, Real Estate at Arch Amenities Group, to share his thoughts on flexible workspaces, as part of our series into the buildings of the future.

What are the biggest challenges facing the flexible workspace / landlord market?

Today, structural shifts in the way tenants consume office space are driving the expansion of a subclass of Class A buildings known as “Activated Assets” that are genuinely accretive to tenants’ businesses by enabling capital efficiency, operational agility, workplace choice, and talent magnetism. We estimate only 5% of buildings in today’s office market are positioned and operated this way.

What are the biggest opportunities for the flexible workspace / landlord market?

The biggest opportunity for landlords is to take advantage of the redistribution of demand that’s underway from commodity buildings to “Activated Assets.”

When we say use the term “Activated Assets” we’re referring to specific operating characteristics. On the operating side, “Activated Assets” are highly tenant-experience focused. They have a hospitality-focused operating team in place.

They are productized to meet the full spectrum of tenants’ needs including traditional long-term space, serviced pre-built spaces, coworking space, shared conference/meeting/event space, and tenant amenities. And all of that is seamlessly delivered from a prop tech standpoint and from a boots on the ground operating standpoint.

Although tenants are signing up for less space than they did before, they are paying significant premiums for "Activated Assets" -- and that means there is a huge value creation opportunity for owners who reposition their assets strategically.

What are the key pain points and benefits of a flexible real estate strategy?

For landlords to truly align with the way demand is going, they will need to put a completely new operating model in place. The era of long-term leasing being the singular revenue stream in an asset will give way to buildings transitioning to, in our estimate, around 30-35% flex/agile space over this next cycle.

That’s a huge adjustment, especially for landlords who don’t know how to run this new type of asset in terms of the products and services that need to be integrated together into the full “amenity stack.”

But the opportunity is massive. The key tenants in the market – the blue-chip tenants owners covet and want to attract – fully expect the supply side to evolve in the “Activated” direction we’re talking about. So the owners who respond quickly and compellingly will absolutely flourish.

What role does/can technology play in delivering flexible workspace?

The role of technology is about integration. Today, all the physical characteristics that owners have built into an asset – the flex/agile workspace, the tenant lounge, the conference center, the food and beverage offerings – are still highly fragmented and difficult for a company and its employees to seamlessly consume. All the structural components the building is putting in place to satisfy tenants’ evolving expectations need to come together in an integrated “amenity stack” that the end users of a building can seamlessly interact with. This can’t be done without having the right technology solutions in place.

What does the future of flex look like to you?

Flex space is an important piece of the evolution of the office market from a commodity business into a services business. The new services-intensive operating model for an asset, in many cases, will look like: productization that meets the needs of a wider variety of office users, much higher levels of churn, a greater focus on the “customer” within the building at a day-to-day experience level, and the curation of a hotel-like atmosphere in the building.

In other words, the future looks dramatically different. But progressive owners (with the right partners in tow) who move quickly to evolve their buildings – physically, technologically, and operationally – have a very bright future ahead of them.

Read more insights from the industry experts:  
Part 1
with Faye Stutts, National Director of Coworking Partnerships, Vari
Part 3 with Mark Burge, President, Flex Workspace Solutions.
Part 4
with Michael Kloppenburg, Vice President, Avison Young.
Part 5 with Jamie Russo, CEO, Everything Coworking.
Part 6 with Liz Elam, Founder of GCUC Global.

 


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