After spending years below the top 20 largest flex office markets in North America, Atlanta is finally catching up.
Atlanta saw the sixth largest gross expansion of flex office offerings between Q4 2020 and Q3 2021, according to research from real estate services giant CBRE.
Flex space, or pre-built work environments that tenants can lease for shorter periods of time, represents just under 2% of Atlanta’s office market. But square footage is rapidly expanding as companies’ uncertainties in post-pandemic work strategies are driving their office decision making.
“The activity alone in the last 90 days on a couple of these flex providers is even pushing, if not already exceeding, where we were in Q4 2019,” said RJ Zurak, Vice President of Advisory and Transaction Services with CBRE. “That has everybody pretty darn bullish as to what’s going on.”
Incorporating flex offerings — which range from coworking spaces, spec or turnkey suites and schedulable meeting rooms — allows building owners a way to capture tenants reluctant to sign longer term leases with large swaths of space. They’re often using flex space as an amenity to differentiate themselves from similar product, Zurak said.
Landlords can also use them to attract tenants to ink longer term leases in traditional spaces elsewhere in the building.
“Smaller, new groups ultimately move in, fall in love with their building, and as they grow, they grow with the landlord,” Zurak said.
Major office towers throughout Atlanta are signing management leases with coworking giants We Work and Serendipity Labs, including the Interlock in West Midtown and Buckhead’s Three Alliance Center. A number of smaller, boutique flex operators have outposts in Atlanta office campuses, like Switchyards, Strongbox West and Roam Interactive Workplace.
Some landlords are offering multiple flexible options, like The Ardent Cos.’ massive Piedmont Center campus in Buckhead, which now includes a slate of spec suites and Switchyards’ newest location. Others are circumventing flex operators entirely and “getting into the game themselves,” Zurak said. If they’ve got idle space sitting on the market, landlords will lean toward spending their tenant improvement allowances to integrate spec suites, which have performed well in Atlanta.
Commercial services company Jones Lang Lasalle (JLL) predicts owner-operated platforms will gain scale within the next year.
“That’s creating ideas, creating new competitors for all the big boys in the market, and ultimately the tenant wins because he or she has more opportunity to find the right location for them,” Zurak said.
An increase in flex square footage can benefit Atlanta, which has attracted several major corporations over the past 18 months, Zurak said. Nevermind major players like Microsoft and Visa, both of which announced plans to open hubs in Atlanta — smaller companies sending down 10 employees to take advantage of Atlanta’s resource base can use flex space to house their operations until they decide on their next move.
“I think flex is in a big-time position to capitalize not only on the new jobs the specific companies have created but there’s a lot of different groups they’re going to draft on that,” Zurak said.