Real estate has always been a lucrative arena for investors. Traditionally, real estate investment primarily revolved around residential or commercial properties. However, the industry is evolving rapidly, especially within the commercial real estate division. One of the most profitable trends is investing in flex space real estate. What is flex space, and what are its benefits?
Flex space is a type of commercial real estate that gives businesses a multi-purpose space on a short-term lease, typically a month to three years. There is a high demand for business premises with offices and other floor areas under the same roof, making flex space a lucrative investment.
The necessity of working from home during the global COVID-19 pandemic proved that remote work is a real possibility for large portions of the workforce. As many businesses now embrace hybrid work and others require multi-purpose buildings, flex space has become a godsend to these business sectors and investors who see its potential.
What Is Flex Space In Commerical Real Estate?
Flex space is a hybrid of industrial and office space. They are typically, but not exclusively, single-story, and you will find these workspaces in converted warehouses or other light industrial buildings. The building is usually divided into several units, each with its offices on one side and storage, retail, or showroom space on the other.
Flex space buildings often have large warehouse doors, loading docks, high ceilings, and sometimes mezzanine floors. The multi-function nature of these workspaces attracts many types of businesses, including medical research companies, artists, brewers, manufacturers, and auto shops, to name a few.
Flex space is not limited to one business model, though. Its most attractive quality is its adaptability, making it suitable for various business needs. These flexible properties can include on-demand workspaces, coworking offices, offices for long-term tenants, companies looking for a move-in ready space customized to their needs, and premises for those looking for short-term leases.
Flex Space Real Estate Is A Good Investment
Flex space is one of the most in-demand commercial property types for investment due to its versatility, profitability, and popularity amongst a broad spectrum of businesses. Whether you’re building your flex space from scratch or purchasing an existing property, this type of commercial real estate has so many benefits, making it an excellent investment.
Flex space attracts many businesses because it solves so many of their significant issues. The ever-changing work patterns have caused businesses to reassess the benefits of traditional leases. Leasing flex space addresses their need for shorter leases, provides suitable space for all their work purposes, and the rent is typically lower than traditional retail and office space.
Reasons To Invest In Flex Space Real Estate
Investing in flex space can be exceptionally lucrative because owners can lease the spaces very easily, the building doesn’t usually require much renovation, and such premises are in high demand. Here are some excellent reasons to invest in flex space commercial property:
- Flexibility and adaptability: It is easy to customize these spaces to suit a wide array of business needs, including warehousing, manufacturing, offices, and research and development companies. This flexibility means that investors will always be able to adapt to the evolving needs of their tenants. Such properties are highly sought-after by tenants and investors alike.
- High demand for flex space rentals: The demand far outweighs the flex space stock on the commercial real estate market. More businesses are looking for flexible spaces that can serve their varied business purposes under the same roof with the added benefit of easy modification when their needs change.
- Highest industrial rental rate:The high demand and exception flexibility have driven the rental rates up.
- Low vacancy rates: With limited flex space available, there will always be tenants to occupy these buildings. Although flex space tenants usually have short-term leases, the benefits they enjoy on these premises often turn them into long-term tenants.
- Most tenants pay their rent. Despite having the highest industrial rental rates, rentals are still more affordable than in traditional spaces, resulting in most tenants paying their rent.
- High resale value: Flex space is a lucrative investment, which increases the price of such property.
- Good returns on investment: Higher rentals due to increased demands for flex space facilitate strong ROI. In addition, the property’s adaptability enables owners to refurbish and repurpose them, which helps to increase their value and appreciation. Investors also enjoy rental income from multiple tenants and significant profits on resale.
- Diversification Of Investment Portfolio: Diversification is essential for creating a profitable investment portfolio. By incorporating flexible workspaces into their portfolios, investors can lower risk and protect against potential downturns in other commercial real estate sectors.
- Resilience in economic fluctuations: The high demand for flex spaces ensures their financial stability during economic downturns and market fluctuations, making them secure and reliable investments.
How To Maximize The Flex Space Experience
Although the demand for business-specific, flexible workspace ensures low vacancy rates, many investors and building owners don’t leave it there. They design creative workspaces that lure desirable tenants to the property and justify them charging extra rental per square foot.
To start, investors should paint the building in modern color schemes to make the business premises look more appealing. Another aspect that lends aesthetic appeal to the area is landscaping. Planting some trees and shrubs around the building makes the area look more attractive, and top investors found that it influences the amount of rent they can charge.
Many owners take it further, including coffee shops, art installations, classes, happy hours, and even clearing entire floors for events.
Identify Possible Risks Before Investing In Flex Space
There are three risks that investors should look out for before purchasing flex space in industrial areas. Firstly, they should look for hidden costs that can affect their return on investment. Then, if investors are buying an old, unused building that was built 50 -80 years ago, they should look for structural damage and environmental hazards.
The Bottom Line
Flex space is an excellent response to the world’s ever-changing working world. It provides companies with versatile, adaptable premises at lower costs than traditional offices or retail space while offering shorter lease periods. Flex space presents an exciting and lucrative opportunity for investors willing to embrace change and adapt to the ever-evolving work landscape.