The softening commercial real estate market needs to give office tenants flexible sharing rights within their leases.
Historically, office tenants of buildings (both large and small) have required the approval of their landlord partners to share space or sublease space to another company or individual. See below for what this language typically looks like:
Tenant may assign this Lease or sublet all or any part of the Premises, with Landlord’s prior written consent, not to be unreasonably withheld, conditioned or delayed, by first notifying Landlord of its intent to assign the Lease or sublet the Premises. Landlord must respond to tenant within 30 days of such request.
The changing landscape of how companies use their space is proving that there are days when nobody is using the office. At Flexday, we are full supporters of the office and believe that a place to congregate on a regular cadence is needed to help create and build company culture (among other benefits). With that being said, we have not come across any CEO, business leader or investor that wants to spend money on something when they don’t need it or aren’t using it.
That’s why, moving forward, office leases need to allow for the ability to share office space on-demand to recover rent when the space might otherwise be vacant. At Flexday, we are helping tenants do this and are connecting them with our paying clients. In certain instances, this has helped tenants recover tens of thousands of dollars. Flexday has proven to be such a great tool that some these tenants took their space off the sublease market! See below:
“Flexday has been a terrific partner helping us monetize our space while our staff transitioned to a hybrid working schedule. Flexday has been able to rent out our office on a regular cadence (1–2 days each week) and we have been able to plan work from home days for our team around their bookings, to maximize our time in the office, and use of our space.” - CEO, Energy Solutions Company, Toronto
“Flexday has connected us to a marketplace we didn’t know existed and as a result, we have been able to realize commercial opportunities for our physical workspace. In a continually evolving world of remote & in-office employment, our view on commercial real estate has changed now that we know there are flexible opportunities that can accommodate our own employees needs as well as other organizations seeking fresh office experiences for offsite sessions.” - Managing Partner, Creative & Strategic Studio, Toronto
As a landlord, this might seem risky, but if you think about it, doing this can actually make prospective tenants more comfortable signing a lease (or extension) knowing that they are able to recover rent when they want to without having to go through a lengthy landlord approval each time. If the appropriate insurance and process is in place, the tenant can do this comfortably without headache for them and for property management.
To make this effective, it will have to incorporate the following:
- The ability to share the office and collect revenue (rent) while doing so — either the full office or partial depeding on the setup
- No landlord approval is required after the lease is signed as long as the necessary insurance is in place for both the tenant and the customer — this will reduce any friction and allow the tenant to make these decisions quickly
- Have the ability to do this for up to a certain number of days each calendar year (a good way to protect the landlord)
- Report revenue to the landlord (and potentially give them the ability to share in the revenue if they need to be incentivized to set this up)
It’s not a one size fits all approach and it might not work for specific buildings or tenants, but it definitely can work for the majority of office tenants out there.
In closing, make sure you incorporate this practice into your next office lease or extension. Once you do, give us a shout at Flexday and we’ll bring you companies looking to rent space by the day, week and month to help offset your rent when you aren’t using your office space.