Flexibility Is How The Office Is Getting Its Groove Back

It’s almost a reflex for commercial real estate leaders to answer doubts about the return of office leasing demand by pointing to a flight to quality. This trend, they say, is evidence of recovery and the shape of things to come. 

However, new data points toward office demand making moves to another future: a flight to flexibility and agility.

This is because — unfortunately for most office asset owners — shiny new amenity-rich and transit-adjacent office towers are the exception, not the rule. And the lofty cost puts these buildings out of reach for most companies looking to downsize and relocate to offer employees shorter commutes, exciting amenities and inspiring workplace experiences. 

As of 2023, only 10% to 15% of U.S. office buildings are considered trophy assets, and there is a rental rate premium of 51% for these top-tier office properties in gateway cities, according to Cushman & Wakefield. And a 66% drop in new office project deliveries will drive down the already-tight 9% vacancy rate in this asset class in Manhattan, according to JLL.

So the growing tenant demand for downsizing and upgrading upon lease expiration can’t all be satisfied with a flight to top-quality buildings at stratospheric rates. A wider spectrum of buildings will need to satisfy this demand by offering more flexibility and higher levels of service. This kind of reinvestment by office asset owners is already attracting a wider pool of prospective tenants.

Unlike pre-pandemic leasing levels, which were buoyed by venture capital-fueled coworking and high-growth technology companies, future office leasing demand will come from tenants seeking new purpose for the office. Offerings will need to be places for employees to connect and energize and must support collaboration. 

As more of the workforce untethers from dedicated desks, companies like leading artificial intelligence technology provider Uniphore are selectively shedding conventional office leasing in favor of signing one-to-three-year agreements for well-located, fully serviced workplaces for up to 100 employees. 

“We considered how we want to work together going forward and decided Serendipity Labs’ serviced space solution not only met our workplace standards but helped us attract talent and bring our teams together more often,” said Joe Kenny, senior manager of real estate and workplace services at Uniphore. 

Melissa Cates, president and general manager for Serendipity Labs, a leading international workplace operator with 12-plus years of experience, said flexible workplace companies like hers are aligning with landlords to deliver alternatives to conventional office leases. She cited a successful collaboration between Serendipity Labs and The Durst Organization in a 41K SF facility near New York City’s Grand Central Terminal at 205 E. 42nd St. 

“We completely reimagined a former WeWork space and redesigned two work lounges, three cafés, five boardrooms and countless private retreats for wellness and focus, topped off with a collaboration suite for 50 people and rooftop event space,” Cates said. 

Serendipity Labs also added privacy film to glass walls, office carpeting and better lighting to transform the former coworking space into a professional workplace that will meet enterprise standards for compliance and security.

“We brought in our signature hospitality team to create a serene yet vibrant workplace that helps our members maintain momentum and energy,” Cates said. “A continuous calendar of member events, sponsored talks and professional networking activities encourages employees to choose to spend their day together.” 

Today’s average office lease is for 3,200 SF, according to CoStar. Coupled with hybrid work styles, that office can accommodate a workforce of 30 to 40. Five years ago, a conventional lease would have required 10K SF to serve the same team. 

“Today, a flexible workplace can deliver a complete solution to meet any hybrid work strategy,” Cates said. “With work lounge access and meeting room booking privileges across Serendipity Labs’ hub-and-spoke network, the agility extends to suburban locations, for when employees need an inspiring place to work close to home.”

And Cates said it is access to that level of flexibility and agility that is helping the office get its groove back after a tough few years.

This article was produced in collaboration between Serendipity Labs and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.