Manulife US REIT (MUST) has, on Sept 15, entered into a management and licensing agreement for Flex by JLL to take up 15,407 sq ft of office space at the 11-storey office property, Plaza, at 500 Plaza Drive in Secaucus, New Jersey.
The space at 500 Plaza Drive makes up 3.3% of the building’s net lettable area (NLA).
The agreement is accompanied by options for Flex by JLL to lease a further 20,451 sq ft in two phases, bringing the combined floor plate to 35,858 sq ft (7.7% of NLA) by 2023.
In total, the three phases are expected to achieve a stabilised rent premium of around 30% to the market. In total, the three phases will cost around US$6.8 million ($9.6 million) to build out over two years.
Phase one, which comprises mostly flex desks and private offices, is expected to be completed in April 2023. Phases two and three will comprise mostly enterprise suites.
Flex by JLL is JLL’s enterprise-grade flexible space solution. The agreement is the first official ground-up Flex by JLL office space to come to market in the US. This also follows MUST’s announcement during its results for the 1HFY2022 where it revealed its two-pronged approach to capture the growing market demand for flex and modernised office space.
The Flex by JLL space at 500 Plaza Drive will offer flexible private offices, co-working spaces, meeting rooms, team suites and virtual offices to organisations and residents in the region.
In addition, 500 Plaza Drive is situated within Harmon Meadow, offering tenants a variety of on-site amenities and providing convenient access to the New Jersey Turnpike, Route 3 and surrounding hotels, restaurants and retail.
Tripp Gantt, CEO of the manager, says that the partnership has “tangible benefits” for MUST.
“With the flex space business model having evolved from the traditional serviced office and coworking spaces pre-Covid-19, the new structure will allow MUST to enjoy greater upside potential by sharing a majority of the operating profits with the operator,” he says.
“We believe that this product presents a compelling value proposition for tenants to justify paying a rent premium for the flexibility and amenities offered by the flex office solution. This would also allow MUST to maintain its relationships with tenants and creates a real possibility of new flex tenants eventually converting into traditional tenants,” he adds. “Above and beyond these benefits, integrating flex space into Plaza will also drive foot traffic in the building.”
Further to his statement, Gantt believes that the partnership is “ideal” due to the existing relationship between MUST and Flex by JLL spanning facility management, capital markets brokerage, leasing and development services.
“We believe this partnership will generate accretive, risk-adjusted returns that are superior to the alternative of pursuing traditional leases in the space,” he says.
Units in MUST closed at 50.5 US cents on Sept 14.