Further findings from the Investment Property Forum report on “Investment Implications of the Flexible Space Market”.

* A passive approach of leasing traditionally to an operator is expected to result in both lower, and more volatile, income.

* Passive landlords, adopting a ‘hands-free’ approach, will be taking a lower rent for a longer lease term, reducing their exposure to a downswing. However, there is the risk that the operator is unable to survive a downturn, leaving the landlord with the costs of running, or liquidating, a business centre in a difficult trading environment and without the requisite skill set.

* Operating directly or through a management contract is expected to become the model of choice.

* To remove the risk of operator default, whilst retaining the premium income for flexible leases, many investors are considering a DIY approach, as outlined in the IPF Report. A partnership between investors and operators, sharing the additional income and the volatility, is an effective means of profiting in the new office market where flexible leasing is a significant, and growing, component.

* Market data requires a systemic overhaul to support effective valuation

* A move towards an explicit DCF valuation approach will require market statistics compiled from the records of the major operators over at least one downturn. As transparency improves and more investors gain experience of flexible leasing requirements, liquidity is expected to improve, as the number of experienced operators in the market grows to provide a sufficient investor base.

To download the report please click here.