For those who find coworking too casual but don’t want to be locked in to a long term office, San Diego’s biggest owner and developer of office real estate — the Irvine Co. — has come up with what it’s billing as the perfect answer.
The company has started what it calls Flex Workspace + — a sort of hybrid of coworking space and traditional offices.
Irvine Co. is offering offices fully furnished to be leased for six months or more with the ability to expand or contract, depending on business cycles.
The program is aimed at startups and others that can’t afford or don’t want to make the big upfront expense of furnishing an office and don’t want the commitment of long-term leases, said Steve Case, Irvine Co.’s executive vice president of office properties.
“We try to provide all the attributes of coworking but do it in a way for companies that want their own branding, that want privacy, that want it to be about their own company,” Case said. “It’s a related but different product from coworking.”
Rather than sharing space, tenants get a private office space tailored to their needs.
That could be several floors in a building or it could be an office suite.
Tenants choose the size and duration of their lease and pick from a menu of services.
Flex Workspace+ suites range from about 1,000 square feet to about 10,000 square feet with most between 2,000 square feet to 5,000 square feet, Case said.
“You can pick one that’s already fully furnished or you can order furniture through our program and we can fully furnish it within 30 days,” Case said.
Setting the Rent
Rents will depend on the size of the space that’s leased, the length of the lease and the ancillary services someone chooses.
For instance, Irvine Co. can brand office space with signs and the logos of tenants “to align with their culture and what they want to do,” Case said. “We have a design package that shows them how they might do that. We work with a consultant that actually sits down and works with the prospective customer and tells them how we can brand it.”
Appointed to head Flex Workspace + was Brian Brown, formerly with Knotel, an office leasing company based in New York.
The new program sort plays off and replaces the ReadyNow office rental program that the Irvine Co. started more than a decade ago, Case said.
“Flex Workspace+ is a logical evolution of the competitive advantage we pass along to customers as the sole forever owner of our workplace communities,” said Doug Holte, president of Irvine Co. Workplaces.
Targeting Small to Medium-sized Cos.
Although the target market for the Flex Workspace+ program is small to medium companies and entrepreneurs, Case said it would also work for larger companies “that want something that’s ready to go without any capital who need flexibility.
“We believe that over the next five to 10 years, many of our large-company customers will be benefitting from Flex Workspace+ as part of their workspace footprint,” Holte said.
San Diego is one of five metropolitan areas where the company is offering Flex Workspace+.
The others are the company’s home base in Orange County, Silicon Valley, Los Angeles and Chicago.
In San Diego, Irvine Co. has set aside about 265,000 square feet of space in UTC, Mission Valley and Del Mar Heights for Flex Workspace, Case said.
“San Diego is a significant market for us. We think there’s a great demand and we think our product hits a unique place in the market,” Case said. “UTC and downtown are our two major markets, followed by Del Mar Heights, then Mission Valley.”
Irvine Co.’s entry into the short-term office market is good news for tenants, said David Marino, executive vice president and co-founder of Hughes Marino, a commercial real estate brokerage that represents tenants exclusively.
“The more plug-and-pay space there is on the market, the better,” Marino said.
Furnishing an office and installing the needed technology typically costs about $30 per square foot, Marino said.
“If you can avoid all of that, pay a little bit more in rent, it’s all good,” Marino said, adding that some of the bigger coworking companies offer programs similar to the Irvine Co.’s where tenants can lease private office space without long-term leases.
“Tenants don’t want to waste money on furniture and tech costs,” Marino said.
One advantage the Irvine Co. has is “they’ve got the better buildings in the market with the better locations,” Marino said.
Alan Nevin, director of economic and market research at Xpera Group, said the hybrid plan that Flex Workplace represents “is an extremely high demand product” and a natural evolution of coworking spaces.
“One of the really good things about the Irvine plan is you can come in and have an open space and then, as your business takes off and you have more revenue, you can move into a bigger office,” Nevin said.
Flex Workspace also would be ideal for companies that come to town for a set period of time on contract work but don’t need a permanent office, Nevin said.
“There are thousands of people who have that kind of need and I think Irvine will be incredibly successful with this,” Nevin said.
Stephen Brincks, a finance professor at San Diego State University, said that the Irvine Co. is tapping a growing market, especially for startups that have limited funds.
Keeping Cash Flow Low
“You want to keep your cash flow as low as possible,” Brincks said, and one way to do that is by avoiding upfront costs such as office furnishings and tenant improvements.
Marino of Hughes Marino said the move is “strategically smart” for the Irvine Co. because as companies in Flex Workspace+ grow and decide they need more permanent space, they already have a relationship with the Irvine Co. and are more likely to lease long-term in a building owned by the company.
“It makes sense for them,” Marino said.