Article

Why bundled tech packages are coming to offices

As tenants seek simplicity, landlords are stepping up

March 17, 2022

Selling products grouped together at a lower price, rather than selling them separately, isn’t new. Insurance companies do it, as do fast-food chains with their value meals.

But now it’s coming to offices. In a push for flexibility and simplicity amid a shift toward hybrid working, office tenants are seeking turnkey options—and savings—when it comes to their utility, internet, and tech packages, and lately, they’ve got the leverage to make it happen.

Flex-space operators such as WeWork, Industrious, and CommonGrounds captured market share pre-pandemic with startups and small businesses that wanted short-term leases and office space with all the bells and whistles.

The growing trend that started with flex space may one day take over entire office buildings, experts say.

“Many of those startups are shying away from 10-year leases because they don’t know what the next decade is going to look like,” says Anastacia Anderson, Vice President of Investor Partnerships for Flex by JLL. “So, flex space is here to stay. And making that network infrastructure just one part, or even just a single line item of the package makes that space even more appealing.”

Anderson says the continued push for flexible amenities is driven by a younger generation stepping into decision-making positions.

“They grew up in a world where they’re three clicks away from buying whatever they want,” Anderson says. “They’ve just negotiated a 75-page lease and then they have to set up all the internet, cable, and any other tech they need? They’re over it by then. They know they want to be in the building, and they’re happy to pay landlords to figure out the rest.”

Multi-ethnic business people using laptops while sitting in cubicles at office

Big business

It’s not just smaller businesses that are pressing for change. Corporate tenants are also demanding shorter leases and greater agility. JLL’s 2021 Global Flex Space Report states 41% of tenants expect to increase their use of flex space as part of a post-pandemic work strategy.

Many landlords have seen the writing on the wall and decided to go at it alone or use management agreements with flex-space operators.

Jason Lund, JLL Tech Infrastructure real estate expert, sees bundling services as the next level of the flexible work environment.

“There are already technological players coming out in the space,” he says, listing off Join Digital, Red Bison, and Air Waves as a couple of examples of companies that bundle and manage services like telephone, internet, and firewall.

“In the next 12 to 24 months, more and more owners are going to start putting in this central network,” Lund continues. “At some point, a tenant is going to walk into a building and say, ‘Look, if I go across the street, I get a full bundled package of everything I need, that’s also cheaper and ready to go day one.’ That day is coming; mark my words.”

Lund also says it helps alleviate the rip and replace costs within tenant space and addresses mounting cybersecurity concerns.

“Tenants will call anyone off the street to come in and install anything and attach it to whatever network they pay for with no concern for cybersecurity at all,” he says. “A supplied network that is professionally managed with high levels of cyber monitoring reduces the risk of cybersecurity issues in the building.”