I recently attended the CoreNet Eastern Regional Symposium during which I attended a session titled "Emerging Technologies and Corporate Real Estate Innovation." With a title like that, how could I not attend? During the session, Brian Collins, Global Workspace Strategies Leader for Microsoft, and Alan McGinty, Director, Global Workplace Solutions Group for Cisco both talked about a changing workforce. The millennial workforce is less focused on personal space and more technology driven, touching five different pieces of technology hardware per day. Tablet usage is increasing as the workforce gets more mobile, not only within the office, but also having the ability to work anywhere. There is also a major focus on collaboration and teaming, which given modern technology doesn't necessarily need to happen in person. These trends are leading companies to change their design standards, providing more conference rooms, break out areas, and smaller cubes. McGinty showed us an online model of Cisco’s recently updated Connected Workplace, which is very much on the cutting edge of the latest design features.
However, it's not just technology companies that are getting more dense. A large accounting firm cut their Central New Jersey office from 81,000 sf to 62,000 sf without cutting their headcount. They did so by utilizing a "hoteling" environment for their auditing staff. Auditors who are typically at client sites were not provided with individual offices. Rather, there is a group of offices that are available on a first-come basis.
Law firms, historically one of the least efficient industries on a square foot per employee basis, are also jumping on the bandwagon. Large associate and partner offices are shrinking to a more manageable size and large law libraries are obsolete due to a little thing called the internet. When partners realize they can decrease their space by up to 20% in some cases, it's easy to justify the necessary investment to achieve long term savings.
While this leads to a more efficient workplace environment, allowing companies to accommodate more employees in less space, there are several potential problems with this trend, not the least of which is...
WHERE'S EVERYONE GOING TO PARK?
Typical suburban office buildings are parked at a ratio of four spaces per 1,000 rentable square feet. That means that there's enough parking to accommodate a density of 250 square feet per person. In a downtown environment, or with a transient workforce that's not in the office all of the time, this isn't a problem. However, in a suburban environment with a target ratio of 150 square feet person, landlords will be challenged to provide additional parking. As the market tightens, tenants may have a hard time finding buildings that can accommodate the parking.
Recently, one of our clients leased 20,000 sf of additional space in a Class B building across the street from their 140,000 sf Class A location. The 20,000 sf is being used strictly as overflow parking. They determined that it was cheaper to lease additional space across the street and pay for a valet service than lease an additional 35,000 sf in the Class A building to provide 250 square feet per person.
The other potential problem is employee consensus. I know in my office, it will be hard to convince senior brokers (myself included) to give up private offices that we worked hard to get. Convincing long-tenured employees to adopt something that's good for the company, but may not be good for them, may be a challenge. That said, if the change is simply mandated, as many companies are doing, it can create a backlash an HR nightmare.
One thing is for certain - trends will change. However, as we see this shift in workplace environments, buildings with low parking ratios will be limited in the tenants they can target. On the flip side, buildings with excess parking will be in high demand, irrespective of many other factors including the quality of the actual building, amenities, etc. And for the record...I like my office, but will try to be open to hearing what they have to say when they come to take it away.