Shrinking Desk Space: What it Means for You and Your Tenants

Offices have changed a lot over the past few years. Whether employees are asking for more daylight or an office that resembles a home, the pace of change has accelerated.

One of the biggest consequences of these new offices is the shrinking average square feet per employee. Although this rate typically fluctuates with the health of the economy — as it did between 2008 and 2014 — there seems to be a consistent trend toward shrinking sf/employee. Just look at that graph from NAIOP.

Although shrinking sf/employee has been seen in several boom and bust cycles, companies continue to hire more and more people and squeeze these new employees into their existing office space. And, there seems to be little indication that this trend is abating soon.

Like the digital age, the open office plan is here to stay

The unprecedented ratio of employees to RSF is due to two contributing factors: shrinking leases and the millennial office. According to NAIOP, the average size of the office lease has shrunk in the past decade — admittedly not equally. As it turns out, Class A offices are staying about the same size, while Class B and Class C office leases have dwindled 8.8% and 18.4%, respectively.

While companies occupying Class B and Class C offices are seeking smaller leases, they’re also hiring much faster. According to ULI’s Emerging Trends Report, companies with less than 50 people are generating 46% of new jobs. The result is even more people is less space.

This shrinking space is a consequence of millennial-driven office design, which values communal space. Because the competition for good talent is fierce, businesses want their workspaces to attract the best employees, and they can do this by offering wide-open office environments with all kinds of perks. Often, these amenities include nap rooms, coffee bars, workout rooms, large meeting areas, and other creature comforts that make people happy to go to work each day. But these larger amenity spaces often come at the cost of personal desk space.

What does this mean to CRE professionals?

You can help new businesses find office accommodations that are conducive to that airy, laidback, cooperative environment. Additionally, you can be sure that existing properties have the necessary technological and environmental upgrades to attract companies that desire a more collaborative, friendlier, and creative work environment.

In years to come, many experts agree that an open, flexible floor plan with plenty of natural light will become the norm, not just a passing fad, and this is where big opportunities for real estate development can occur. Because many current office environments are carry-overs from the cubicle days of the 80s and 90s, creative architects and real estate developers can make the most of updating and repurposing these facilities.

Possibilities await

As the economy recovers and jobs become more plentiful, ensuring that office buildings are ready to serve today’s tenants offers new opportunities for the commercial real estate industry. Take advantage of these circumstances by keeping property owners abreast of current trends so they can update office spaces to reflect the environments that are currently in demand. Additionally, remind clients that it is advantageous for spaces to be technologically and aesthetically up to speed for today’s highly mobile, “work anywhere, anytime” philosophy. It can certainly be a win-win situation. You just have to think like a millennial.

Billy Fink
Billy Fink
Billy Fink is a former member of the VTS team.
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