Why COVID did your new office lease a favor
At the onset of the COVID-19 pandemic, work-from-home mandates left companies unsure what to do with their office leases. Premature comments were made about the death of the office, with some speculating that WFH would be the way of the future. However, remote work fatigue spiked and productivity declined as the novelty of telecommuting wore off. To counteract these negative effects from a total work-from-home model, companies are now seeking tailored, flexible office leases to align with their employees’ desires for flexible work schedules. Though flexible lease opportunities were previously not offered by landlords, COVID shook up the office leasing market. Flexibility has become a focal point, resulting in a multitude of new office lease opportunities available to tenants.
This notion of flexibility (both for employee schedules and office lease terms) has changed the way we look at office space. The traditional 5- to 10- year lease model is no longer something tenants will accept. COVID made it so that tenants are no longer at the mercy of commercial landlords; it has created a competitive environment by leveraging landlords against one another, thereby equalizing the landlord-tenant power dynamic. Tenants are now leveraging their newfound power to secure tailored office space solutions that suit their needs.
Customized Lease Solutions and Office Space Opportunities
There are many more flexible office space opportunities and customizable lease solutions available to tenants right now. Here are all the options on the market:
Coworking has been around for a few decades, and continues to be a highly viable option for freelancers, small teams, and even enterprise companies looking for flexible, fully-managed space. Now more than ever, coworking operators are offering great deals on space, making it even more affordable.
For companies that need office space flexibility but that want less of the coworking hustle and bustle, shared office space is a great option. In a COVID world, knowing who you are sharing a space with is ever more desirable. The shared office model typically looks like this: A company with excess space sublets a portion of their office to another company, typically on a month-to-month basis. Shared space provides the flexibility and affordability that coworking offers, as well as some of the social and networking benefits.
While the concept of office sharing is not particularly new, a variety of technological solutions (like PivotDesk) have formalized the process in recent years, making the process for finding shared office space more efficient and transparent.
Lease term flexibility:
While lease term flexibility has typically been associated with coworking and office sharing, the growing need for lease flexibility for all types of companies has changed the flexible office landscape. Even for established companies looking for traditional office space, it often isn’t prudent to sign the typical 5- to 10- year leases that landlords have required.
The pandemic has accelerated this change by levelling the commercial real estate playing field, thereby allowing commercial tenants to negotiate more favorable lease terms that accommodate their unique sets of needs. Turnkey solutions like FLEX by SquareFoot also offer tenants lease term flexibility on a direct lease: Tenants can walk into their own fully functioning office space on a short term commitment.
Timeshare office space:
For many companies, a Monday to Friday, 9 to 5 onsite schedule will no longer be a reality. Many employers will want office space on a part-time basis in order to collaborate and strategize in-person, but they will also spend a considerable amount of time working remotely. Office “timeshare” options allow companies to split an office space with another company, such that each company gets allocated an amount of time per week or month to spend in the office. This is a great option for those who want to divide time between the office and home, but still want the privacy of a traditional office.
The pandemic has raised concerns around commuting, as public transportation (especially in urban centers) isn’t conducive to social distancing. By implementing satellite offices in suburban areas, employees can minimize the number of people they come into contact with while commuting, as they’re often able to travel by car or bike. It also allows them to better blend remote and onsite work, since it becomes generally easier, safer, and more cost-effective to get to the office. This hub-and-spoke model also ensures that fewer people are occupying the same space at the same time.
This option can also actually save companies money, since big cities often have much higher asking rents than suburban neighborhoods.
COVID has led to a significant increase in the number of subleases on the NYC market as companies look to shift spaces to accommodate changing needs. Subleasing out your office space is a great way to address a variety of pandemic-induced commercial real estate scenarios. Examples of these could be:
- If your company is looking to switch to a satellite office model
- If your company wants to find an office with more space for social distancing
- If your company wants to downsize to accommodate for more remote personnel
Renting an office sublease is also highly beneficial for subtenants. It’s a great way to secure a flexible lease on an entire office, with more favorable rates than traditional leases may offer.
Part-time meeting space options:
If your team isn’t ready to sign onto a dedicated space yet but still wants to congregate for certain meetings, there are a variety of part-time meeting spaces and hourly rentals available to you via solutions like Breather and LiquidSpace. You may also have an office lease, but still prefer to have key company strategy meetings off-site.
Modifying your current office lease:
With more negotiating power, many tenants are opting to work on modifying their current office leases to reflect their current situations. This can take the form of lease renewal, lease termination, lease restructuring, office relocation, or “blend & extend” leases (in which tenants opt to renew early and extend their lease in exchange for more favorable lease terms). Tenants will always highly benefit from having a tenant broker on their side when making any lease negotiation with a landlord.
What should your new office lease look like?
When shopping for a new office lease in today’s market, it’s important to consider the level of flexibility your company needs relative to how much space you need. If you want a shortened lease term but want the size, privacy, and day-to-day autonomy that a traditional office affords, a FLEX by SquareFoot space or an office sublease might be your best bet. If you only want to go into the office some of the time, you may opt for part-time meeting space or an office “timeshare”. Whatever you choose, finding a new office lease doesn’t have to be daunting at this time, as there have never been more tenant-centric options on the market.
It’s crucial to start looking well in advance of the date by which you’ll need space. Starting too late could force you into a space that doesn’t function for your business, or lock you into terms that put your firm at a disadvantage.