What the customer wants is what the customer gets. That' the basic principle on which rests the newest trend in office and industrial space -- flex space. By most definitions, it is space that can be molded, fairly inexpensively, to the tenant' needs. And it' springing up in parks all across the Southeast as more and more companies seek a high-image, combination warehouse/office environment that helps cut down on operating and utility costs and is easily accessible for distributors and customers alike.

According to Michael Adler, chairman and CEO of Adler Group -- one of South Florida' premier real estate companies -- flex space is catching on everywhere, but is concentrated in large metropolitan areas, particularly sprawling areas within a community or submarket. "It' a natural tendency for modern businesses that don1t want to congregate in a central business core and that want a metropolitan location that' closer to home," says Adler.

Location is a major factor for distribution facilities, especially for companies like WebVan, that are moving product in and out all the time. "It' also important for companies to have convenient accessibility for their customers," says Jody Tidwell, director of development for The YATES Companies, which currently develops office/industrial flex space geared toward more upscale office facilities with showroom and distribution areas. "High-tech companies are especially interested in making their multi-use facilities impressive to customers."

In fact, the defining criteria for flex space, aside from a higher office space percentage, is the quality of landscaping and architecture, according to Whitfield Hamilton, vice president and industrial division leader for Colliers Turley Martin Tucker. "You see heavier parking areas, and buildings with more glass, entryways and walkways," says Hamilton. "A flex building, or business center, is different from your standard office/warehouse building, which may have just one or two entryways on each corner. It' typically designed to create a higher image."

Another trend in flex space for larger companies is to be on a communications route. "These companies are looking for a good fiber route and lots of power," says Dan Holzworth, special projects operations manager for Batson-Cook Company in West Point, Georgia.

In converting properties, Batson-Cook not only considers technology issues, but also looks for anything that might make it difficult to create a flexible space that meets the owner' needs. Key flex conversion considerations, says Holzworth, include issues such as construction material, roof systems, proper insulation and foundations, which are important when considering adding things like air conditioning and loading docks to a facility.

Flex space tenants can be customer service companies with call centers; high-tech companies that require a decent amount of office or engineering space as well as some warehouse or production space in back; or small, local distributors who have a heavier concentration of office space and want to create a nicer image and control costs. "You can get into a good-looking, high-image flex building with rates that are $2 to $4 per square foot less than a full-service Class A or B office building," says Hamilton.

Flex Activity

South Florida' Adler Group has capitalized on the flex demand with an entire business community dedicated to flex space. Founded in 1999, FlexxSpace unites the company' diverse portfolio of office, showroom and warehouse properties. It was designed to enable tenants to expand or contract space as they see fit, while offering exclusive advantages like high-speed Internet access, use of multipurpose conference centers, reduced rates on cellular service and office supplies/furniture, use of a business-to-business web site (www.flexxspace.com) and more. Flexible leasing policies help ensure that tenants can expand their space as their business grows.

"Adaptability is inherent in the product type," says Adler. "The wonderful thing about flex space is that even if no one else has ever done it or thought about it, you can possibly do it for the first time."

With FlexxSpace, Adler Group' goal is to reduce the amount of space that tenants need on their own premises, and instead, they can meet many of their needs in a communal environment that is not only furnished, but has all of the bells and whistles one expects in a conference facility. For every million square feet in FlexxSpace' network of business communities, the company has a conference facility of approximately 3,000 square feet, on average. Ultimately, tenants have access to multiple conference rooms, as well as private offices for out-of-town guests, at locations across the Southeast. The facilities are priced on a shared tenant cost structure, which helps tenants reduce the need for individual facilities and helps increase operating efficiency.

Adler Group' commercial FlexxSpace portfolio bustles at nearly 8 million square feet, with more than 1,500 tenants throughout South Florida, Tampa, Orlando, Georgia and North Carolina. One recently completed FlexxSpace project in South Florida is Miramar Commerce Park, a 165,000-square-foot industrial park in Miramar that offers tenants, such as Mercury Marine and IMotors.com, a multi-purpose conference facility with video teleconferencing. Other similar projects are New Town Commerce Park in Davie, Florida, and SunPort Commerce Center in Orlando. SunPort is an industrial flex building offering 165,000 square feet of space to tenants including IMotors.com, PEICO and Entertainment Caterers.

The company has also just completed Blue Dolphin Studios, a custom-built, 50,000-square-foot television and film studio, for the Cristina Saralegui (the Spanish community' equivalent to Oprah Winfrey) Entertainment media empire. The $4 million development will house 75 employees and includes 20,000 square feet of office space and three soundstages for a total of 30,000 square feet of production space.

As a major traffic and distribution hub, Atlanta and the surrounding area is another prime market for flex development, especially south of the airport. Batson-Cook has seen a lot of buildings in the area go from typical warehouse distribution space to office space. The company is currently converting a 376,000-square-foot warehouse distribution building into a corporate office and data center for eDeltaCom.

The YATES Companies, headquartered in Philadelphia, Mississippi, is getting a lot of requests for high-end finishes for more visually appealing facilities. An example is Diversified Technology in Ridgeland, Mississippi, a $13.1 million, 142,000-square-foot industrial flex space building. The facility was constructed with highly detailed, architectural pre-cast concrete wall panels for the exterior walls, and decorative terrazzo flooring and elaborate cherry millwork throughout the lobby and executive office areas. The facility also features imported fabric wall coverings, specialty paint and glass reinforced gypsum columns.

JESCO, Inc., a YATES Company, recently completed a flex space project for Russell Corporation in Montgomery, Alabama. This $20.9 million, 540,000-square-foot facility includes manufacturing and distribution space with plentiful office space, allowing the company to house all aspects of the business under one roof.

Charlotte, North Carolina-based Crescent Resources currently has a 422,000-square-foot industrial project under construction in Laverne, Tennessee, just outside of Nashville. The concrete tilt-up, rear-loaded buildings have retail as well as restaurant opportunities, and are scheduled for completion this summer. "The space is considered industrial Øflex1 in that we' able to propose the facility as 100 percent office space, or typical industrial distribution space with a limited amount of office and mostly warehouse space," says David McRae, leasing representative for Crescent Resources.

Most of the flex activity in Nashville comes from Indianapolis-based Duke-Weeks Realty Corporation. Currently, the company is building the second phase of Riverview Business Center and just purchased 178 acres of raw land east of the Nashville International Airport near the corner of Couchville Pike and Reynolds Road. The land is adjacent to the proposed Harding Place extension near Dell Computer Corporation' new assembly plant and could eventually offer up to 1.5 million square feet of business center and flex space.

"There' some pent up demand for flex space in Nashville," says Hamilton. "Construction over the past couple of years has been down, and rents have continued to rise." According to Colliers Turley Martin Tucker' 2001 Commercial Real Estate Report for Nashville, the market has become increasingly tight over the last year due to a lack of new product. The overall vacancy rate for business center space dropped from 6.4 percent in third quarter 2000 to 5 percent in first quarter 2001.

In the Baltimore/Washington corridor, the hottest markets for flex space are Columbia and the airport area, according to Tim Zulick, vice president of Trammell Crow Company. The company is currently developing Phase II of Montpelier, a four-building, 155,000-square-foot project on the south side of Columbia. Phase I consisted of a build-to-suit, 155,000-square-foot space for Horizon Wireless. Two other build-to-suit sites in the same development were completed for Johns Hopkins Applied Physics Lab and TAI, a training center for the Acupuncturists Institute.

"The R&D or flex market in Washington is very tight, with vacancy rates hovering between 5 and 7 percent," says Zulick. "The bulk industrial market has a 7 to 9 percent vacancy factor. Vacancies in bulk buildings are typically reflective of buildings that have low ceiling heights, shallow trunk courts or are in a location with poor trunk access. So developers are currently trying to tie up land and build all single-story product types on spec."


©2001 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.