Collaborative Workplace Impacts Demand for Commercial Real Estate

It’s no secret that corporate America is slowly moving away from the cubicle based workplace plan and towards a more open and collaborative model. It now appears this is more than just a passing fad and may represent a more permanent shift.

Originally inspired by West Coast tech firms, big office tenants are now downsizing their spaces as they increasingly adopt policies for sharing non-dedicated offices and implement technology to support their employees’ ability to work outside the office.

According to Norm G. Miller, PhD, a professor at the University of San Diego, Burnham-Moores, Center for Real Estate, if office tenants used 20% less of the nation’s current office space, which has a total valuation of $1.25 trillion, that decrease in demand would represent $250 billion in excess office capacity.

This trend has long-term financial implications for office building owners and investors. But that’s not all. According to Miller, four major trends are impacting the commercial real estate market:

Move to more standardized workspaces.
• Non-dedicated office space (sharing), along with more on-site amenities.
• Growing acceptance, even encouragement of telecommuting and working in third places.
• More collaborative workspaces and functional project teams.

John G. Osborne, executive director, leasing and marketing at Bergman Real Estate Group in Iselin, NJ, states that the trend to shared office space is more prevalent among larger publicly traded companies than smaller firms. “The majority of our smaller tenants, those that lease less than 5,000 square feet, still prefer private offices than an open plan,” he said.

At the same time, there is also a growing desire for more face-to-face collaboration and less telecommuting, especially in light of Yahoo’s recent announcement. Open floor plans and more common space are the opposite of telecommuting. As companies discourage workers from working offsite, they’re adding more on-site amenity space for employees.

However, one downside to more people per square foot means more stress on facilities. Squeezing more people into existing or even smaller spaces is putting structural stress on office buildings systems, such as parking, elevators, restrooms and utilities that were not designed for the new demands of density that occupiers are seeking.

Is all this collaboration and downsizing just a passing fad?

Only time will tell. But, at this point, it looks like the collaborative workspace is going to be around for a while. Jason Lewis, president and managing broker of EcoSpace in Denver, predicts, “Downsizing is here to stay as the new generation of workers will keep requiring a more collaborative, flexible and social work environment. With increased density of populations and increased ability to work mobile, the need for huge corner offices and closed wall work environments will be all but extinct in the near future.”

Source: Mark Heschmeyer | Changing Office Trends Hold Major Implications for Future Office Demand | March 13, 2013

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