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WHAT ARE R&D/FLEX FACILITIES?

R&D/Flex properties are industrial properties that are typically designed to serve multiple purposes and are often considered a bridge between industrial and office real estate. We believe that the minimum office build-out in R&D/flex facilities is typically 25% of the facility’s totalspace with the remainder of the space often consisting of a combination of light manufacturing, specialized lab, and/or warehouse/ distribution space. With that said, the interior design and build-out of flex facilities often varies as they are typically constructed to specificallysuit a tenant’s unique needs.

In terms of the tenant base, many pharmaceutical, industrial and technology companies utilize R&D/flex facilities to develop, test and improve new and existing products and services. Corporations in these sectors prefer R&D/flex facilities as they offer the ability to house multiple space types (i.e. office, lab and manufacturing space) within one facility, which can offer these corporations efficiency and cost savings relative to these corporations occupying multiple, separate facilities. Additionally, due to their unique design and use, tenants often invest a significant amount of their own capital into the specialized equipment utilized in flex facilities. Because of the combination of efficiency, cost savings, and significant tenant investment in R&D/flex facilities, tenants often regard these facilities ashighly mission critical to the tenant’s business.

R&D/flex facilities currently represent the third largest primary category of industrial real estate with approximately 12.5% of total U.S. industrial square footage as of Q1 2020(A). Over the past ten years, the industrial flex asset class has experienced significant growth due to increased tenant demand from a variety of industries. This growth is evidenced by the total square footage of R&D/flex space increasing from 44 million SF in Q1 2010 to 171 million SF in Q1 2020. Additionally, over the same period, flex transaction volume increased from $3.4 billion to $24.6 billion.(B)

A)  Real Capital Analytics
B)  Real Capital Analytics

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