Contributed ArticleFeatureOfficeProperty Management

Landlords Can Create Inclusive and Profitable Tenancy Options

Jason Shepherd

By Jason Shepherd, co-founder of Atlas Real Estate and REACTIV

Commercial Real Estate (CRE) is on the cusp of profound change in vibrant markets like Denver. For too long, the norm has been to fill vacant space with yet another bank branch or chain restaurant rather than offering young creatives and entrepreneurs the opportunity to occupy it for innovative enterprises. The walls are starting to crumble around the traditionally clunky lease terms, creating a new and exciting wave of collaboration, sharing and flexibility.

The Rigid Structure Suffocating CRE

The CRE industry is stuck in an unfortunate cycle of adhering to its own dying status quo. The current structure and nature of it is disjointed and unsustainable. Today, many landlords make all-or-nothing, one-time lease offers that bind tenants to their
properties for five to 10-years. These terms create a high barrier of entry for many entrepreneurs, creatives, fabricators, inventors, etc. from renting space to occupy their dreams. The industry is a take-it-or-leave-it system that puts rigid constraints on who or what can utilize commercial space. Antiquated, old paradigm terms attract traditional, old-school tenants.

However, a new generation of innovators is knocking on the door of commercial real estate. They have grown to expect more flexibility, sharing and collaboration in all aspects of their lives. These renters seek more reasonable, fluid terms that enable them to work in vibrant offices, launch their restaurant in a food hall or drive their mobile apparel truck to a lively gathering.

What Today’s Entrepreneur Demands

Younger generations are accustomed to fluid, flexible terms of service in every area of life. To them, a cumbersome two-year gym contract is unheard of thanks to options like ClassPass. Cable contracts and packages are nearly extinct thanks to a plethora of new pay-for-what-you-watch streaming services. In metro areas, buying a car and paying it off through multiple installments is
uncommon; why bother when you have car sharing, Uber and Lyft at your fingertips? Increasingly, everything we need is available on-demand or on an as-needed basis. Today’s entrepreneurs and creatives expect flexible terms of service, and many industries have stepped up to accommodate their needs.

Unequivocally, the future is nimble, convenient and shared. This provides a viable opportunity for forward thinking business and property owners to pivot from only offering old clunky terms and start meeting consumer demand where it really is. This doesn’t mean that leases move from five years to five minutes. Rather, leases can at least offer the option to bridge the gap between ownership goals and renters needs. You can continue to wait for your Chipotle tenant, but in the meantime, monetize your space and let it serve as a canvas for the next generation of young, creative and dynamic tenants.

The Future Is Collaborative, Shared And Flexible

Flexibility nurtures collaboration. Younger generations thrive in community settings that encourage partnership, interaction and social connection through close proximity, which often leads to increased creativity, productivity and innovation. Companies like WeWork have found success in the sharing economy because millennials are not intimidated by co-tenancy; instead, they welcome it.

Additionally, they are open to dynamic uses. Your local juice bar is also a yoga studio and an event space. We are blurring the lines of real estate use, a trend that will only continue to grow as we find more ways to keep every square foot of our property vibrant 24/7.

Flexible terms create a win-win-win: increased revenue opportunities for business and property owners, work/play spaces for entrepreneurs and creatives who wouldn’t otherwise have access to it, and increased neighborhood vibrancy.

The Opportunity For Commercial Landlords

We’re on day one of the real estate evolution; technology and new consumer demands will once again help breathe life into vacant or underutilized bricks and mortar. Decades of digital connection leaves people longing for in-person connection in physical spaces. Property owners that entertain unique uses and flexible terms have the opportunity to be an active part of this change.

Innovative and flexible rental terms will create greater demand, increasing the pool of potential occupants. The sky’s the limit in terms of space usage, and the only constraint is a building owner’s flexibility and a renter’s creativity in using it.

Owners shouldn’t toss their 50-page lease for hourly rentals just yet. Instead, they should be more receptive to flexible occupancy terms that give them a bit more revenue, while at the same time giving young entrepreneurs the ability to launch their dreams.

Jason Shepherd is an investor, entrepreneur and community builder. For the past several years, he has been reimagining the role of property owners, galvanizing them to serve as hosts to connect community. Jason is co-founder of Atlas Real Estate, a wellness-based social club (Archipelago) and new marketplace technology (REACTIV).

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