There’s an ongoing debate in the commercial real estate industry about if and when businesses will return to their offices as the COVID-19 pandemic subsides. If businesses do decide to go back to the their physical location rather than continue remote work, CRE firms and owners are betting big that they’ll opt for flexible office space.
For example, SL Green, New York’s biggest largest office landlord, is the latest of a long line of CRE owners to become a flexible office space provider, Crain’s New York Business reports. The company announced it is dedicating the 54th floor of its One Vanderbilt Avenue building to Altus Suites, its new coworking venture. Tenants will have access to all of the building’s amenities such as VIP access to its restaurants, the third floor lounge and meeting space, as well as the Vandy Club. Valet Parking, fully stocked pantries and an executive shower will also be at Altus Suites members’ disposal.
“It’s a high-design, high-service offering,” Steve Durels, SL Green’s director of leasing told Crain’s. It’s not your typical pre-built program.”
The company developed the Altus Suites concept last year, according to Durels. SL Green recognized that flexible office space was becoming more necessary when the pandemic hit the U.S. The coworking space is expected to be ready by December. Office sizes will range between 6,300 to 7,500 square feet and leases can go from three to 10 years, Crain’s reports. Standard leases at One Vanderbilt last between 10 and 20 years. Durels noted the coworking arrangement is ideal for family offices, private equity firms and hedge funds.
“They don’t want to spend the time to build out the suite themselves,” he told Crain’s. “They’re not large enough to take a full floor in the building, and they’re not certain about their future space requirements.”
Flex office space is a growing CRE trend
SL Green is not alone when it comes to dedicating some of its square footage to coworking space. A recent CBRE report showed that 86% of office occupiers said flexible offices will be a part of their long-term real estate strategy, Crain’s reports. Meanwhile major CRE firms like the Durst Organization, Tishman Speyer and CBRE have created their own coworking solutions.
Tishman Speyer recently opened two coworking locations for its brand, Studio in New York. The company currently has approximately 350,000 square feet of flexible office space throughout New York.
“We’re kicking off the official season of going back to the office,” Thais Galli, Tishman Speyer’s managing director.
Meanwhile, the Durst Organization launched its coworking solution, Durst Ready, in 2019, prior to the pandemic. Durst Ready offers flex space across five of its office properties. It now has leased approximately 115,000 square feet to its clients. It hasn’t closed a deal since the COVID-19 pandemic began, however. The company is confident that trend will change as people return to New York and office tours demand increases, company spokesman Jordan Barowitz told Crain’s.
CBRE was also ahead of things as it announced its coworking concept, Hana in August 2019. The first space opened in the Dallas area and the company opened the first New York location this month at Silverstein Properties’ 3 World Trade Center. There will be 85,000 square feet across two floors that will comprise pre-built private office and standard coworking space for collaboration. Hana members can also use the building’s 17th floor outdoor terrace and café. Flexible office space provider Industrious will control Hana during the second quarter of this year, Crain’s reports.
“The pandemic has certainly forced companies to focus on more flexible or alternative ways to provide office space, and flex is certainly part of that equation,” Amy Johannes, the vice president of Hana’s North America operations said.
Joe Dyton can be reached at firstname.lastname@example.org.