NEW YORK (Reuters) - Blackstone’s Equity Office, a large U.S. owner of office space, said on Wednesday it will offer flexible leasing and workspace in a deal with co-working operator Industrious that promises further ties if a joint effort in Los Angeles proves successful.
Chicago-based Equity Office also said it was adopting the name EQ Office as it embraces the growing popularity of flex workspace at the six-building Howard Hughes Center in West Los Angeles, which is under renovation.
Commercial real estate needs to respond to the consumer of a lease and not solely a company’s leaders, EQ President and Chief Executive Lisa Picard told Reuters.
“We are marketing to the talent,” Picard said, referring to the industry belief that a better work site and amenities will attract the best personnel. Flexible workspace size and lease term are other important features.
“Not giving a tenant flexibility is costing us more money, so a tenant knows that,” she said about traditional leasing. “If they can get rid of flexibility, they can get a really inexpensive deal. If they want flexibility it costs them more.”
The deal highlights the growing acceptance of flexible workspace and represents a major change for EQ, a portfolio of 86 properties with more than 42 million square feet of Class A office space that is owned by Blackstone real estate funds.
The properties are new since Blackstone bought Equity Office for $39 billion in 2007 from real estate magnate Sam Zell.
The deal with Industrious was the result of a request for proposals that began soon after Picard took over EQ a year ago. Closely held Hines, another large property owner, also has sought a partner to gain experience in flexible workspace.
Picard’s vision is different than other industry leaders, said Jamie Hodari, CEO and co-founder of Industrious, which operates more than 40 sites in 28 U.S. cities.
Commercial real estate is being forced to improve a tenant’s experience within a broader trend of office space shrinking to well under 100 square feet per person, said Jesse Keenan, a professor at Harvard University’s Graduate School of Design.
Increasing the user’s experience is part of preventing workplaces from feeling like sardine cans, he said.
“Technology is as much about remote working as it is about on-site experience. Companies increasingly utilize technology to optimize a balance between a core office, home office and satellite office,” he said.
(This version of the story has been refiled to remove extraneous words in paragraph 3)
Reporting by Herbert Lash; Editing by Daniel Bases and Cynthia Osterman