Written by Mike Kriel, CEO of Launch Workplaces
Ten years ago, I couldn’t get a broker to put me in front of a landlord. Fast forward to today, and I’m getting roughly one call a week from brokers asking if they can put me in front of a building owner.
That’s a complete reversal, and it didn’t happen by accident.
Here’s what changed, why the smaller brokerage firms are leading it, and what it means for you if you own a building with space to fill.
Ten Years Ago, Brokers Had No Reason to Put a Coworking Operator in Front of You
For most of my career, getting a brokerage firm to introduce me to an owner was close to impossible. Unless you were one of the three giant coworking operators, you weren’t on their list.
That made sense from where the broker sat. Their job was to find a prime tenant, sign a long lease, and collect a commission. A coworking operator asking for a management agreement didn’t fit that picture, so there was no reason to make the call.
Eight or nine years ago, a broker pitching a flex operator to a landlord would have never happened. Now it’s happening in my markets every week.
There Aren’t Enough 20,000 Square Foot Tenants to Fill the Space That’s Vacant
The math is what changed.
There’s a lot of vacant space in the market, and there aren’t nearly enough prime tenants to absorb it. You’ll still find a 20,000 square foot tenant every now and again, but not at anything close to the velocity of years past.
I’ve written before about how 3,000 to 5,000 square feet is moving a lot faster than 20,000 right now, and brokers are living that every day.
So what’s a broker’s alternative? They can try to do very small deals, one office or one small suite at a time. That’s slow, and it doesn’t move the needle on a floor that’s sitting empty.
Or they can do what a lot of them have now figured out.
A Floor of 70 Offices Gives a Broker a Landing Spot for Every Small Client They Represent
Here’s the pitch a growing number of brokers are making to owners: let us bring in a flexible space operator to help us fill this.
Say the operator takes a floor with 70 offices that hold different numbers of people. Now the broker has a landing spot for every client they represent who needs one office, three offices, or a small team suite. Before, those clients were a problem with no obvious answer. Now they have somewhere to go.
That’s a much easier conversation than “I need one office somewhere, what do I do?”
The broker fills the space faster, the owner gets activity in the building, and the operator gets a floor and a pipeline of small tenants. Everyone’s working toward the same thing.
The Boutique Brokerage Firms Are Leading This, Not the Giants
What I find interesting is who’s making these calls.
In my markets, it’s the boutique firms. The smaller brokerage shops are more nimble, more flexible, and they’re looking for creative ways to compete with the giant firms. Bringing a flex operator to an owner is one of those ways.
That tracks with what I’m seeing elsewhere in the industry. The largest property management firms have already moved into flex management, and smaller operators captured most of the new coworking opportunities last year. The firms that have to work harder to win are the ones finding new ways to do it.
Commercial Office Is Still a Difficult Product, but We’re Past the Bottom
I don’t want to oversell this. Commercial office is still a tough product, and the brokers calling me aren’t doing it because they’ve fallen in love with coworking.
They’re doing it because it works.
I do think we’re past the bottom. More importantly, people have changed their attitude and their approach to getting tenants into a building. At the end of the day, the goal hasn’t moved: how do we produce value for a building owner? The route to that goal looks different than it did ten years ago, and brokers have adjusted.
What This Means if You Own a Building Right Now
A few things worth sitting with:
- If your broker hasn’t brought you a flex option for a stubborn vacancy, ask why. The firms that compete hardest are already doing it.
- If a broker does bring you an operator, treat it the same way you’d treat an operator reaching out directly. Here’s what to look for when a coworking operator comes knocking, and don’t stop at one conversation.
- Think about your building as a set of landing spots. A floor of flexible offices gives your leasing team a place to put the small tenants they’re turning away today.
The brokers have figured out that a floor of flex is a tool. It’s worth figuring out whether your building should have one.
For a full walkthrough of how great operators approach management agreements and what you should look for when exploring flexible office space for your building, start with The Commercial Landlord’s Guide to Flexible Office Space.
And if you aren’t already watching, Flex in Five on YouTube is where I break down one landlord question at a time.
