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Posted: July 07, 2013

Office space evolution

Companies going smaller, cheaper and mobile

Mike Dano

Perhaps unsurprisingly, a hot topic of discussion these days is how companies can capitalize on technologies that untether and mobilize employees. If an employee can move from a desktop to laptop computer, can that employee suffice with a smaller desk? If the contents of a file cabinet can be digitized and saved onto that laptop, can a company reduce its physical space? And if that employee can take his or her laptop home and work from there, does the company need an office at all?

“It’s definitely a topic of conversation with almost every client in some form or fashion,” acknowledged Dan McGowan, senior vice president at the Denver branch of Jones Lang LaSalle, a financial-services firm focusing on commercial real estate. McGowan represents companies in Colorado that are negotiating new office leases.

He pointed to a client’s recent lease as an example of how these converging trends are beginning to transform companies’ spatial needs. He said the client – an environmental consulting firm that declined to be identified – was able to reduce its office footprint by almost 35 percent by evaluating exactly how the work space is used. With employees meeting customers, visiting work sites and producing with equal effectiveness from home, “It turned out only 65 percent of them were in the office space at the same time,” McGowan said.

In response, the company issued laptops to each of its employees and reworked its layout by eliminating assigned desks. Now employees on-site are able to select an open seat and have their calls dynamically routed to any desk they are working from that day. Employees can also work from home or a coffee shop if they have no pressing reason to be in the office. To ensure accountability the company invested in software to track employees’ productivity so no one slips through the cracks.

“It was really just the culture of that company that has really embraced the concept,” McGowan explained, adding that a 35 percent reduction in space is an “extreme example” of the trend toward a more mobile work force. But “I think the trend is that there will be more. … It just allows people a little bit more freedom.”

Added McGowan: “Could I work remotely? I absolutely could.”

Jennie Nevin has similar examples. The owner of Green Spaces, a multi-site co-working  facility, said that a group of architects recently decided to position their business in Green Spaces rather than purchase dedicated office space.

Co-working offices are “cheaper and more flexible,” Nevin said, explaining that companies can easily add or drop desks as their business needs change.

Indeed, the trend is such that Nevin said she’s considering opening another Green Spaces location to cater to larger companies looking for traditional office alternatives.

 

Employees’ office space is shrinking

Research from a number of sources shows that McGowan and Nevin aren’t the only ones following this trend. Jones Lang LaSalle conducted a survey this year of more than 600 corporate real estate executives from 39 countries and found that 31 percent of respondents have overseen a reduction in the size of their real estate portfolio in the past three years. Additionally, 79 percent believe that space utilization will increase further during the next three years.

According to CoStar, which provides commercial real estate information, marketing and analytic services, the average square footage of all office leases signed in the past decade fell by 7 percent, to about 4,500 square feet. However, the firm noted that if renewals are removed and only new leases considered, the cumulative result would be a 21 percent decrease, to 3,800 square feet. CoStar found the steepest drop – 27 percent – occurred in “Class C” buildings, or relatively inexpensive locations; but even the most expensive Class A locations have declined by 7 percent.

“When it comes to shrinking office footprints, one of the biggest technological game changers has been the increasing ability of white-collar employees to effectively work outside the office. Simply put, the fewer employees that require desks at the office, the less space the company needs to lease. The cost savings from not having to lease (and furnish) space formerly occupied by telecommuters can be substantial,” CoStar noted in a report, adding that employees in the education, training and library sectors were the most likely group to work from home, at almost 20 percent, while those in the health care field were the least likely to work from home, at less than 5 percent.

“There is absolutely a trend toward reduced office space” in the state, said Walter Page, director of office research for CoStar in Colorado. Page said that smaller computers, digitized information storage and the ability to work outside the office will contribute to “at least a 1 percent drop per year for the next five years” in the space needs of office tenants.

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Mike Dano is a freelance writer and the executive editor for the Telecom Group for FierceMarkets, which includes FierceWireless, FierceTelecom and other publications. Mike has been a journalist for more than a dozen years. Follow Mike @mikeddano and on LinkedIn. Mike is based in Arvada.

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Readers Respond

As a commercial mortgage broker we have seen a rise in office condo purchases where business owners can get a return on their investment instead of throwing their money away on a lease. We are now seeing more property types converting to condominium giving businesses the opportunity to own their space and get a nice tax deduction. By Stephen Felt on 2013 07 28
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