There is a good chance that you are familiar with the term “flex” concerning commercial real estate; however, what exactly does this term mean? And what factors contribute to its high demand? Simply put, a flex property, which is an abbreviation for flexible property, is a combination of office space and industrial space. This is a term that should be familiar to anyone who has even a passing interest in investing in commercial real estate.
These structures can either stand on their own or be found in densely populated industrial parks that are only one story tall. Office space is typically located in the front of a rental property, while storage and warehouse space is typically located in the rear. The adaptability of these spaces makes them appealing to a diverse range of businesses, including those in the fields of construction, manufacturing, e-commerce, medical distribution, and logistical distribution, to name just a few. One of the reasons that the flex product type has been so successful is that it enables businesses to house their offices, warehouses, and manufacturing facilities all within the same building.

Customizable at a Low Cost

The adaptability of flex space is one of the features that make this type of office space so appealing. For instance, if tenants want to increase the amount of office space or warehouse space that they have, they can easily do so with flex space because the costs of improvement are lower in comparison to office products. Flex space is available in many different configurations The vastly varied composition of the building’s tenants is yet another advantage that can be categorized under this heading. Unlike multi-tenant office buildings, which primarily house white-collar businesses
like law firms, insurance companies, and financial institutions, amongst others, flex assets house a wide variety of tenants, from retail-style restaurants down to construction companies. The customizable build-outs make it possible for each flex industrial park to have a robust mix of tenants, which is something that standard multi-tenant office buildings would not be able to accommodate. As a consequence of this, landlords are reducing their exposure to risk by populating their business parks with a diverse mix of tenants from both the national and local levels.

Triple Net (NNN) Leases

Arguably the benefit of flex assets that is the most significant, is how the majority of landlords structure their leases. When it comes to flex spaces, the vast majority of tenants will typically have a Triple Net Lease structure in place. The landlord is responsible for paying taxes, insurance, and common area maintenance in a Triple Net lease, but the tenant is responsible for paying those costs. The phrase “common area maintenance” most accurately refers to the costs of utilities and other general expenses that are incurred in the process of maintaining the common areas of an asset, such as the costs of general landscaping and parking lot expenses. In contrast to multi-tenant office buildings, in which it is customarily the landlord’s responsibility to pay for the expenses described above, flex assets provide the owner with the exceptional opportunity to steer clear of these kinds of outlays. As a result, the sole responsibility of the Landlord in a structure known as a Triple Net Lease is the payment of significant upfront capital costs.

If you would like to learn more about Flex Space, please call 281-727-0497 or send us a message online by clicking CONTACT.