Mariwyn Evans writes about commercial real estate for REALTOR® Magazine. You can reach her at firstname.lastname@example.org.
The Walls Come Down
More companies are shifting to open-plan offices, adding amenities while reducing square footage.
November 2, 2013
If you’re sitting in a private office reading this, you may be a bit of a dinosaur.
A 2013 survey by CoreNet Global found that 81 percent of corporations have adopted an open-plan office. Such spaces usually feature wallless workstations, lounges for collaboration, and amenities such as a food court or foosball table. Once limited to high-tech companies, these designs are now attracting lawyers, accountants, and even real estate firms.
While an open plan may be good for collaboration, it’s not so great for absorbing space. “One of our large corporate clients just went to an open-plan office and was able to decrease its square footage by 20 percent, even though the common-area seating increased by 200 percent,” says Richard Bernstein, executive vice chairman and principal of commercial real estate services firm Cassidy Turley.
That’s typical: According to research by Cassidy Turley—which includes both owner-occupied and multitenant Class A and B buildings—average space per worker dropped from 225 square feet in 2010 to 213 square feet today. Those figures may get even smaller in the coming years, says Dr. Norm Miller, professor at the University of San Diego’s Burnham-Moores Center for Real Estate. Miller has found that companies signing new leases are going into smaller spaces per worker than in their existing leases.
Why the Trend Has Traction
There are several key drivers behind this sea change in workplace space. Saving money is the most obvious, but that’s only part of the equation, says Garrick Brown, director of research at Cassidy Turley.
“If you look at the data, the trend toward open offices began before the economic downturn,” Brown says. Ultimately, “technology is the linchpin of the move to open offices,” Miller adds. As more data is stored on shared servers and on the cloud, static and wired connections become unnecessary.
Another big appeal is a more collaborative and creative work space. “Companies are truly realizing that the quality of their work space is key to employee recruitment and retention,” says Brandon Fugal, executive vice president of Coldwell Banker Commercial in Salt Lake City. And smart commercial real estate companies are recognizing that having an open office themselves “mirrors their clients’ experience and helps new clients visualize how their built space will look,” says Jonathan Larsen, regional managing principal of Cassidy Turley’s Los Angeles office.
Making an Open Space Work
What does a building need to lure companies seeking an open plan? First, amenities: Many buildings are adding shared conference areas, recreation rooms, gyms with showers, and quality food service. “Companies are becoming more discriminating in the amenities they expect. In many cases, they are requiring landlords to provide them,” says Fugal.
Still, the more employees there are in an office, the more strain this puts on a building. The biggest challenge is parking. “Three or four parking spaces per thousand square feet isn’t going to cut it anymore,” says Andrew Cheney, CCIM, SIOR, a principal with Lee & Associates in Phoenix. Buildings are going to need five or six parking spots per thousand square feet, especially in suburban areas without good access to public transit. Some solutions: preferential parking for carpools, leased off-site parking, valet parking, and incentives to use public transit, says Edward Schmidt, CCIM, who heads NAI Miami.
For older buildings, it’s also critical to look at HVAC capacity when evaluating whether they can handle higher worker density, says Katherine Molyson, development manager for Cousins Properties Inc. in Atlanta. Restrooms, elevators, and stairwells have to comply with building codes as -occupancies increase. Pre-1960s buildings with limited conduit space face particular challenges.
Other factors that can make an open-plan design work in an older building include higher ceilings, lots of natural light, and not too much distance between windows and the core of the building, says Bernstein.
Lobbies are also being reconfigured to reflect greater openness. “We are seeing lobbies renovated with lighter tones and more exposed ceilings to create a feeling of light and openness,” says Larsen.
How Low Will it Go?
Open plans aren’t effective for all companies, though. Workers at call centers, for example, may need more privacy because they use phones more frequently, Brown notes. Financial brokerages and banks with more competitive internal cultures have also been slow in moving toward open offices. Even for firms that are conscious of reducing their footprint, “we probably won’t see space per worker drop below 150 square feet,” Brown says.
And some companies recognize the need for more private work spaces so employees can focus better. That probably won’t reverse the overall trend toward smaller spaces, says Richard Kadzis, CoreNet Global’s vice president for strategic communications. But he points to another 2013 CoreNet survey, in which almost half of respondents say that open-plan offices are detrimental to workers’ focus and privacy.
The Impact on Occupancy
It’s difficult to gauge how much of an impact a move to higher worker density will have on building occupancy. Brown estimates that the shift in workplace design will reduce overall office demand by approximately one-third in the next decade.
“Over the last 20 years, we’ve seen an average annual office-space absorption of 70 million square feet. As open office space becomes the norm, that could drop to 40 million square feet a year.” Brown says.
While space per worker is likely to keep contracting, the change will take “a long time to trickle through because of the large installed base of leases already in place,” says Mark Gibson, a principal and leader of construction and real estate advisory services at Ernst & Young. A countertrend may help. Gibson says some clients have said that new Generation Y workers may be keen on having a private office. The best news: “As long as your local economy keeps growing and the proportion of professional workers increases, office [space] will be in demand,” concludes Miller.