August 5, 2020
When was the last time your rent rate went down over time?
Or, your had a flexible 6-12 month term?
Yeah, never is probably true for most lease-holders.
The last decade or more of commercial renting here and abroad has offered businesses with limited options for length and pricing that suits the needs of the business as it grows.
But as the coronavirus continues to surge around the U.S. and in other countries, lease options are evolving quickly to adapt to the needs of potential tenants – and existing ones – who are deciding now if they should simply go remote and figure out their lease at a later date.
Commercial property in the UK is said to have some of the market’s longest lease terms. Property rental in the country is also known for their historically-established, upward-only rental agreements wherein the rent climbs year over year – regardless of circumstance or market conditions. To adapt the current wave of new remote work adjustments and retain tenants, property managers are beginning to offer “turn over leases.”
Defined by one UK law firm, “a turnover lease is a lease where the rent payable by the tenant is calculated either wholly, or partly, by the actual turnover achieved by the tenant’s business operated out of the premises. … Often in this type of lease, the landlord will receive no benefit from turnover above a certain figure.” What it allows is a lease that’s tied more closely to market conditions and allows for shared risk between the landlord and business.
Similarly here in Atlanta we’re seeing the adaptation of more flexible agreements with shorter terms and more spatial options.
Multi-use space Colony Square in Midtown announced recently that they are offering more than 23K SF of pre-built, pre-furnished space across two buildings to companies for between six and 18 months.
Tim Perry, Managing Partner at North American Properties said, “The pandemic has dramatically accelerated this trend and introduced new concerns for employers. We’re hearing that employers want to control their own workspace to keep their employees and visitors safe and be able to focus on short-term business needs while still evaluating long-term business strategies during the recovery.”
Another notable Buckhead gem, Atlanta Financial Center (the sleek black glass towers that straddle 400) is moving many of its floors to a flexible model as well.
The building owner is marketing “Go Suites” that transform more than 37K SF into short-term, flexible office space.
While these new models will be in competition with WeWork, Industrious and other big-name co-working spaces, the difference and benefit of the flex space is the dedicated privacy and safety these more traditional spaces can offer along with a short-term commitment.
New York Based co-working space, Convene has laid off 400 employees in the height of the pandemic and has closed several nation-wide locations. While their CEO Ryan Simonetti is hopeful they can rebound over time, they are still only opening flex-spaces at limited capacity and working to re-configure many of their amenities like buffet-style lunches and public seating areas.
Time will tell what will stick in the future of work, but for the time being, we’re seeing a shift to flex-offices around the world that provide collaboration, human connection, and control for tenants.
As you adapt your office space, make sure you’re eliminating risk and setting your team up with reliable tech – at home or in the office.
Check out our workplace assessment. We’re helping clients and Atlanta businesses get back to the office and stay safe in the process.