How property owners can monetize their vacant space by converting them into flexible office spaces?

One of the biggest cost-related benefits of the flexible office space concept is that it reduces the risk of leasing to a single tenant, says Nakul Mathur, MD, Avanta Business Center.

There is a famous quote by legendary investor Warren Buffet – “If you don’t find a way to make money while you sleep, you will work until you die.” The words by the world’s one of the wealthiest people basically tried to convey the idea of “Make Money While You Sleep”. And, if we connect this quote and words of wisdom by Warren Buffett with real estate amid coronavirus pandemic, a lot of inspiration can be drawn to make money.

When the 2nd wave of Covid-19 hit India, most of the offices were temporarily closed to curtail any further spread of coronavirus so as to save more and more lives, amid all this, office spaces kept lying unused, eventually resulting in losses. This created a big crisis. But, as PM Narendra Modi said in many pandemic-related addresses to the nation – ‘we have to turn this coronavirus crisis into an opportunity. Now, keeping this in mind, the concept of flexible office spaces comes into the picture.

In view of the coronavirus crisis and office spaces lying vacant, many realtors, landlords, office space owners are embracing the concept of flexible office spaces to monetize their empty spaces. A new way – flexible office spaces – to generate revenue has been discovered by office landlords having empty spaces due to coronavirus pandemic. According to real estate experts, traditional office space is now gradually becoming old-fashioned, and demands for flexible spaces are witnessing an upward march.

One of the biggest cost-related benefits of the flexible office space concept is that it reduces the risk of leasing to a single tenant. Also, flexible office space owners at times share revenues with landlords as well. Due to the severe impact left by coronavirus on businesses cutting across sectors and domains, many realtors are not ready and possibly not in a condition to take monetary risks. And, the flexible office space concept is carving out a win-win situation from this scenario.

According to a report, all office spaces are expected to go flexible in some form or the other by the end of the year 2030. Keeping this in mind, there is a huge potential to make money in this domain if landlords and coworking operators join hands to gain mutual returns.

As far as earning money from flexible working spaces is concerned, property owners and operators can choose majorly from three practical options – 1st is management contract option, 2nd one is about revenue sharing while 3rd is franchising concept.

Under the said management contract option between landlord and space operators, a management fee is paid to the operator which is a particular percentage of the revenue that the operator earns from operations. Here, under this scheme, no affixed cost is paid. Hotels today across the world are the best example of this model – a tried and tested one in terms of flexible office spaces. On the other hand, under the revenue share model, the operator pays a fixed rental to the owner for space, and at the same time shares a decided percentage of the revenue as well. And, finally, the 3rd flexible office spaces model talks of franchising, which is in an emerging stage and likely to witness a boom in the coming years depending on the real estate scenario post-Covid-19 era.

Author- Nakul Mathur, MD, Avanta Business Center

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like