More Employees. Less Space.

by / Monday, 03 June 2013 / Published in CRE Trends, iCORE, Industry Trends

Standard_IndustrySpotlightA number of reports have been published lately on the discrepancy between employment growth and demand for office space. According to an article in CoStar, average office employment is growing at a rate of a little over 2% while demand for space is growing at just half that rate.

So why hasn’t job growth translated into a demand for office space? What does this mean to the future of office rent?

The major take away from the recession is that companies need to be increasingly efficient and able to quickly adapt to changing market conditions. The companies that survived the recession are rethinking their strategy for employees and space to ensure that they continue to be competitive and profitable. The resulting trend is a decline is sq. ft. per employee from a historic average of 250 sq. ft./employee to a reduced rate of 195 sq. ft.

So what are companies doing with their space to accommodate more employees into the same sq. footage?
– Companies are leveraging technology to enable their employees to work wherever, whenever. This doesn’t necessarily mean that employees are telecommuting. Rather, companies are having employees share office space and use communal space for meetings and collaboration.

– Companies are increasing the utilization rates of their desks and dedicated works paces from a historical rate of approx. 50% to somewhere between 80 – 95%.

What are the long-term implications for office space consumption?
– Increasing the efficiency of space is a trend that is here to stay.

– Companies will switch their focus from sq. ft. per employee to how productive each employee can be in their work space. This means maximizing access to natural light, good ventilation and temperature control.

– Technological developments will continue to make employees even more mobile and flexible in where they’re able to effectively work. As a result, companies will allocate less sq. footage to assigned office space in exchange for flexible workstations

– Emphasis will be on open floor plans, communal work space and flexibility. While the sq. ft. allocated to each employee is on the decline, the sq. ft. of communal work space including break rooms, exercise areas and flexible seating will continue to increase.