How to get into the Managed Office Market?
As demand for sub 10,000sqft furnished offices rises, its time to understand how office management companies operate.
Avoid the voids, by changing your real estate strategy.
Flexible working will equate to c.20% of all commercial real estate occupancy by 2030.
Capturing the rising demand in flexible working isn't just about adding furniture, its about creating the right amenity, services and the correct legal frameworks first. In the new world, the traditional CAT A office unit is struggling to compete against its furnished and amenity rich competitors.
As a landlord you might be considering furnishing your space in an effort to find an occupier.
However, a easier route might be to partner with a flex management company. These emerging suppliers are filling the widening gap between serviced offices and traditional leases. They are skilled at delivering service lead office solutions, to occupiers wanting a simple office model, at scale but aren't ready to take a lease.
Demand
In recent years the demand and size of requirement has exploded. Typically an occupier would be looking for anything from 1,000-3,000sqft, furnished and on short term arrangement like 1-3years. However, deals are now being done regularly on spaces from 3,000-10,000sqft and for 3-5years. The most in-demand requirements today are typically between 2,500-5,000sqft.
Understanding the legal framework.
The most common method is to lease your space to a management company. They will want expressed terms to 'sub let' by way of a licence agreement, back to their client. The sole purpose of the lease will enable them to licence the office space and manage the clients services for a fee. The Alienation clause will set out this right and terms around the clients covenant.
Landlord - You will receive Rent & SC payments as normal. If you've agreed to furnish the space first, then you can potentially increase the rental expectations, in order to return your CAPEX investment.
The management company - They will deal with BR, utilities, services, maintenance and any other requirements their client demands.
Other management companies might ask the client to sign the lease directly and an addendum will be created in the lease, referencing the management company. The appended document will reference the management companies obligations to the client.
The traditional sub 10,000sqft office world is changing, will you be ready to meet it head on?
