By Joshua Burd
Julie Whelan has been touting the concept of “agile real estate” for the last three years.
But it’s only more recently that her colleagues and peers are paying closer attention.
“In the last year or so, the last 18 months, it has skyrocketed in terms of the amount of interest that people have,” said Whelan, CBRE’s head of occupier research for the Americas. “So people are believing.”
Major tenants and occupiers are now taking a closer look at agile real estate, which involves nimble, dynamic layouts in which employees can float from one type of a work area to another or move seamlessly between office locations. That means developers and landlords should be following suit if they plan on staying competitive in a quickly changing office sector.
“From our surveys that we’re doing with our clients, unassigned, activity-based workplace environments are the name of the game with employers,” said Whelan, who spoke during a recent CBRE presentation at Capstone Realty Group’s Continental Plaza in Hackensack. “This is what they’re planning for.”
The concept of agile real estate may well be a byproduct of the co-working and flexible office space phenomenon, which has come of age over the past decade. And with an increasingly tech-savvy and mobile workforce, along with the fierce competition for talent and a greater focus on collaboration, occupiers are increasingly focused on having agile work environments.
“In a nutshell, what I think occupiers or tenants are asking is: ‘Do I have to fit into the needs of my real estate or can my real estate fit into the needs of the business?’ ” Whelan said. “And that is a very simple statement, but that is a key equation that occupiers today are trying to solve for.”
Fortunately, she said, they have a range of options in many cases, from flexible, on-demand solutions to traditional long-term leases. But that also means that, “right now, occupiers are holding a lot of the power in terms of these conversations” with landlords and third-party providers.
“Those that are playing from an ownership perspective in this agile environment have a lot that they’re trying to learn,” she said. “So what I like to tell my clients and what I like to tell occupiers is that we are so early in innings right now that you have the ability to write the playbook, whereas in five years from now, that’s not going to happen.”
The demand for flexibility from larger corporate clients — often called enterprise users — has fueled recent growth for the likes of WeWork and its competitors. While New Jersey has yet to attract many of the larger players in the shared office space market, doing so could prove beneficial for landlords. A recent CBRE analysis of national building sales found that nearly 40 percent of those that include flexible office space achieved values greater than the average for office buildings in their market.
The CBRE study also found that another 52 percent of those deals were sold at values roughly equivalent to their respective market average. The analysis included 31 transactions within the past five years of buildings with at least 10 percent of their square footage dedicated to flexible space.
“Our analysis found that in some cases the presence of flexible-space tenants — and the building improvements they initiate — may benefit overall property values, causing some lower-classified buildings with flexible space to perform as if they were Class A assets,” Whelan said when the study was unveiled earlier this year. “By investing in build-outs and progressive real estate structures, such as partnerships with flexible space providers, landlords can differentiate their properties and, under the right circumstances, boost their value beyond that of their peers.”
