Last week, as part of its regular reporting on the real estate market, the New York Times had an interesting article, entitled “More Room For Ideas In A Smaller Office”.See http://www.nytimes.com/2012/05/30/realestate/commercial/gaining-savings-and-productivity-from-smaller-offices.html
The article highlights the greater collaboration and innovation that have resulted from the use of smaller, less traditional office space.
I do have the sense, though, that these newly discovered desirable features amount, in part, to making a virtue of necessity.
The Great Recession of 2008 made people think that the vacancy rates of commercial office space was a reflection of the poor condition of the economy. But the reduction in the need for traditional office space has been a trend for a while.
Not mentioned in the Times was a recent survey by Jones Lang LaSalle, a major real estate firm. A report about that had these findings, as well:
- 40% of IBM employees work from a location other than an office at IBM. [The same is true for Cisco and many other organizations, not only IT companies, but those in any kind of intangible service. Indeed the TImes article featured 22squared, an Atlanta advertising agency.]
- The current rule of thumb concerning office space per employee – 200 square feet per employee – is shrinking to just 50 square feet by 2015.
- As early evidence of the trend, office tenants renewing their lease nowadays often cut their total space by around 10%-30%.
In past blogs, I’ve pointed out how, traditionally, city plans and taxes have heavily depended upon office space. Commercial real estate has been the goose that has laid the golden eggs for local governments around the US.
The trend of reduced space per employee will clearly have consequences for those cities that do not start shifting their assumptions about the way the economy will increasingly work.
Those cities will also find their own financial success increasingly misaligned with the financial success of their residents, who are quickly adapting to the new work environment in the home and other places that don’t look like offices. That is not a good situations for mayors and other elected officials.
© 2012 Norman Jacknis