What is Flex?

Guy Westlake is founder & chairman of Lavanda

In the rapidly evolving world of residential real estate, “flex” has become a key term when discussing the management of institutionally-owned apartment buildings.

It embodies the idea of adopting various leasing strategies—short, medium, and long-term rentals—within a single property, aiming to enhance value by providing renters with more flexibility. Yet “flex” carries a dual meaning: it’s both a dynamic operational model aimed at boosting net operating income, known as “flex operations,” and an emerging category of real estate designed from the ground up to offer superior customer experiences (“flex buildings”).

At it’s core, flex is about optimising an asset’s usage, improving renter experiences, and enhancing operational efficiency. This strategy benefits renters, operators, and investors alike by offering a more controlled and optimised experience and outcomes.

This approach includes:

  • Flexibility of use: Modern residential properties are increasingly designed to accommodate a mix of multifamily, co-living, serviced apartments, and student accommodations, aiming to foster a diverse and resilient community. This blended approach is attractive to investors as it allows properties to adapt and perform well despite fluctuations in rental demand, reducing risks and maximising potential benefits.
  • Flexible leasing models: Operators are now combining short, medium, and long-term leases to dynamically respond to rental demand spikes. This approach enables properties to capitalise on the lucrative short-term rental market during peak seasons while efficiently filling vacant units throughout the year, leading to a more agile and profitable asset.
  • A more flexible product and experience: Renters now expect the same level of choice and convenience in their living arrangements as they do in other daily services. Allowing renters to customise their living experience—such as choosing the rental duration, furnishing level, preferred floor, and valued amenities—helps operators attract a wider tenant base and maximise property value.

The genesis of flex: evolving investment strategies

Over time, the real estate investment landscape has shifted significantly. Historically, investment funds focused on single-class mandates, such as exclusively investing in Class A multifamily properties.

However, as the market became saturated, this approach led to heightened competition for prime deals. Consequently, more investors are adopting a multi-class strategy, seeking less competitive opportunities whilst diversifying their portfolios.

This strategic pivot is rooted in a shift in consumer demand, with post-pandemic lifestyle changes driving a surge in demand for flexible living options across all residential segments. The convergence of these demand trends across asset classes strengthens the case for a multi-class investment approach.

Pioneers in this shift, such as Greystar, Brookfield Asset Management, Equity Residential, and The Blackstone Group, have developed hybrid operations capable of managing mixed-use residential assets.

This includes, for example, incorporating Purpose-Built Student Accommodation into multifamily communities, setting a precedent for diverse investment opportunities and allowing for faster capital deployment and portfolio diversification.

As investment strategies evolve, so do the operational demands. Operators, once accustomed to managing single-class assets, now face a landscape that requires versatility and a broader skill set.

Successfully managing a multi-class asset or portfolio necessitates a deep understanding of sourcing diverse tenant types, managing various lease lengths and strategies, delivering different levels of hospitality, and adhering to multiple regulatory standards. The market demand has given rise to a new breed of operator equipped to meet these complex challenges.

Technological advancements have been crucial in facilitating this evolution. Platforms like Lavanda offer the necessary tools for operators to efficiently manage and scale diverse leasing strategies, reducing overheads and promoting more dynamic, agile investment approaches.

Assessing the Impact of Flex Strategies

Flex operations are reshaping residential building design and functionality, advocating for a wider range of living options within individual properties or portfolios. For instance, integrating short-stay serviced apartments within multifamily residences not only increases net operating income but can be managed in a way that maintains the asset’s overall risk profile, achieving a balance between profitability and investment security.

The growing adoption of initiatives like Airbnb’s Friendly Building Programme highlights the evolution of integrated short-stay strategies in the multifamily sector, offering economic benefits to tenants and landlords alike.

As the digital landscape continues to transform how renters find and book accommodations, the need for management tools to evolve in tandem becomes evident. This digital shift underscores the importance of operators embracing digital transformation to centralise and automate leasing operations, improve their focus on customer experience and outperform their competitors.

In this context, the collaboration between Lavanda and Node exemplifies how technology empowers operators to adapt to digital trends and future-proof their businesses. Node’s strategy of creating a global network of flexible living communities, supported by Lavanda’s property management platform, demonstrates how integral technology and innovation is to the future of housing.

Given the significant advances and adoption of Flex strategies, the future of Flex in real estate appears bright. Driven by the need for operators to understand digital trads and align with the evolving preferences of modern tenants, Flex is poised to play a central role in shaping a bright future for the residential sector, enhancing both tenant satisfaction and investor returns.