A high percentage of speculative low-rise industrial buildings today are flex buildings making them a good investment. One of the most appealing aspects of flex space lies within its customizability. For example, if a tenant wants to increase their office space or warehouse space, they are easily able to do that with flex space due to the reduced improvement costs. A flex building also allows for the tenant to have more choices in the type of space their company needs now and in the future at a more affordable price. Developers are favorable toward the flex building as it will meet the needs of many modern sophisticated industrial building users.
The flex building is a speculative, low-rise (usually one-story), single or multi-tenant building that will accommodate different amounts of backroom and office needs, depending on particular tenants’ needs.
Another benefit is the vast diversification of its tenant mix. Unlike multi-tenant office buildings that are catered only to businesses such as law firms, insurance companies, financial institutions, etc., flex assets have tenants that range from construction companies all the way to retail-style restaurants. The customizable build-outs allow for a strong mix throughout each flex industrial park that normal multi-tenant office buildings would not be able to accommodate. As a result, landlords are mitigating risk by having a wide range of diversified national and local tenants throughout their business parks.
The developer finishes the exterior of the building, the interior remains only partially completed until the tenant signs the lease. The interior is then customized to provide space which might be for light manufacturing, research and development, warehouse and distribution, sales and accounting, or inventory control office space.
In existing flex buildings, 50% or more of the interior space may be used for offices. As a 100% office, the building is a low-cost all-office alternative to the low-rise office building.
Flex buildings usually have standard attributes that will help control construction costs. These are:
• A ceiling of 16 to 22 feet. This will handle practically any manufacturing, distribution, or office operation.
• A modern HVAC system that will provide zoned temperature control capability, advanced security measures, and “clean” atmospheres throughout.
• Enough parking space. Loading docks that can adapt to any tenant’s needs. Driveways arranged for easy access for trucks of all sizes.
Because the flex building is attractive to a wide variety of tenants, the speculative builder can expect to find:
• Favorable financing costs, since lenders look more favorably on flex buildings than the standard industrial building.
• Since there is a larger pool of potential tenants for the building, there should be a faster lease-up.
• Lower construction costs. The staged construction will eliminate costly and time-consuming rip-outs of already installed interior spaces that will not meet the needs of a new tenant. Later expansions of tenant spaces are easily handled (at lower cost) because of the flex design features. With this many attributes, the flex building has the making of a very good real estate investment.