The tech crash in 2001, the banking crisis in 2008, a softer period around 2015 and the pandemic each emptied office buildings and left occupiers locked into long-term leases with nowhere to go. John Santora, CEO of WeWork, watched it all happen. He spent 47 years at Cushman & Wakefield, rising to global COO, and saw tenants and landlords absorb the same damage in different cycles. His conclusion, which he shared in a recent conversation at a Yardi executive summit: The industry keeps making the same mistake, and flex is the structural fix.<\/p>\n\n\n\n
The core problem with conventional office leases is that they\u2019re priced for stability in an industry that isn\u2019t stable. A company might sign a 10-year lease based on a headcount projection but two years in the market turns. Then that company tries to sublease space in exactly the kind of environment where no one wants to absorb it. \u201cIf you had long-term leases during all of those crises, what are you doing? You\u2019re trying to sublease them in a market where nobody wants the space,\u201d Santora said.<\/p>\n\n\n\n
The response he\u2019s seeing from sophisticated occupiers is to treat flexibility as a deliberate allocation, not a fallback. He advocates for 25% of flex in a CRE portfolio. That slice lets a company scale into space when it\u2019s hiring and step back without write-downs when it isn\u2019t. It also cuts out the 24- to 30-month lead time that conventional real estate requires, which matters when a competitor is moving faster.<\/p>\n\n\n\n
He described a top-ten global bank that needed 50,000 square feet in London. WeWork signed the membership agreement on December 31 and had the tenant in a customized space by the end of March, roughly 120 days later. That\u2019s the case for flex that doesn\u2019t depend on any particular market condition. It works when the market is expanding, because you can move fast, and it works when the market contracts, because you\u2019re not stranded. Whether the next disruption is AI-driven displacement, a credit cycle or something no one has predicted, it will test every occupier\u2019s portfolio.<\/p>\n\n\n\n
Part of the resistance to flex as a serious portfolio strategy has been the industry\u2019s own early reputation. The coworking aesthetic of the 2010s, with its pool tables, beer taps and ping-pong, made it easy to dismiss the model as something for startups rather than serious enterprise tenants. That model is largely gone now. The flex industry has matured into what Santora describes as an office platform: the same infrastructure serving a solo founder and a Fortune 500 firm looking for a fast entry into a new market.<\/p>\n\n\n\n
The maturation has also changed how landlords think about flex operators as partners rather than competitors. The last 10 to 15% of a large office building is typically the hardest to lease, and once filled, it’s the highest-margin space in the asset. A flex operator in that portion generates revenue during lease-up while giving existing tenants room to expand without relocating. It\u2019s a solution to two problems landlords have always had, and it\u2019s available without building new infrastructure.<\/p>\n\n\n\n
Getting the lease terms and flexibility right is the easier half of the problem. Santora\u2019s sharper argument is about what happens when a tenant walks through the door.<\/p>\n\n\n\n
When nobody is required to come to the office anymore, that shifts the entire calculus of what a building has to be. Office space used to compete on location and price but now it has to compete on whether the experience of being there is worth the commute.<\/p>\n\n\n\n
Santora put it plainly to a room of building owners: \u201cYou tend to take this $300 million asset and you put somebody there who\u2019s making 15 bucks an hour, who grunts to your tenant when they walk in the door.\u201d The lobby and the elevators are the first and last things tenants see every day, and they should always be perfect. The experience of the building is now part of the value proposition that keeps tenants in it.<\/p>\n\n\n\n
The coworking model figured this out earlier than traditional office. Events, programming and visible hospitality function less as amenities in the conventional sense and more as signals that the space is alive and worth occupying. The buildings winning on retention today are the ones that have internalized the same principle.<\/p>\n\n\n\n
The other half of the experience equation is on the occupier side where a well-designed space matters. \u201cPeople need to have a reason to come,\u201d Santora said, and that reason doesn\u2019t come from the building alone. Leaders have to be present to mentor, develop and engage the people they\u2019re asking to make the commute.<\/p>\n\n\n\n
Santora\u2019s near-term watch item is AI\u2019s effect on employment density. WeWork currently has 220 AI firms growing in its spaces. He expects that number to contract before it expands again, as rapid hiring gives way to rationalization once the technology matures. Flex absorbs that volatility, while conventional leases leave occupiers holding space they can\u2019t use or scrambling for space they can\u2019t find.<\/p>\n\n\n\n
The pattern he\u2019s describing isn\u2019t new. The trigger changes every cycle, but the structural vulnerability stays the same for anyone without flexibility built into their portfolio. The firms preparing for the next disruption now are the ones putting 25% in flex, treating the experience of their buildings as a retention strategy and recognizing that the office has to earn the commute rather than mandate it.<\/p>\n\n\n\n
Looking for a connected CRE platform or a flex space management solution? Check out Yardi Commercial Suite<\/a> and Yardi Kube Suite<\/a>.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" WeWork CEO John Santora on why flex space belongs in every CRE portfolio, how to protect occupiers from disruption and what the office must offer now.<\/p>\n","protected":false},"author":616,"featured_media":57824,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_s2mail":"yes","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3245,3225,3247,3233],"tags":[],"class_list":["post-57823","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial","category-commercialcafe-suite","category-coworking-flexible-space","category-yardi-kube-suite"],"acf":[],"yoast_head":"\n