How Much Space Do We Need? CCIM/CIRE Magazine, May-June 2013

The following are excerpts from the subject article by Dr. Norman Miller (whose earlier work we have captured here) and Roger Brown of CCIM.  It highlights that, in contrast the County assumptions of 300 GSF per office worker, office space trends are currently at 185 square feet and shrinking:

Current Space Trends

Looking at square feet per worker on new leases, the U.S. national average in late 2012 was 185 sf per worker, according to CoStar lease data. This number reflects new leases in major markets and a fairly tight economic environment. Company executives do not want to lease too much excess space even though they may find current rental rates are attractive. . .

Future Space Needs

A survey conducted by the author suggests that everyone wants to use less space. Large firms, representing about a third of all office space users, have increasingly moved toward more-standardized shared, or nondedicated, office space. Based on input from CoreNet Global members and CBRE tenants, tenants with footprints greater than 75,000 sf are working harder to use space more efficiently. This group tends to encourage digital storage on centralized cloud-based servers and use nondedicated standardized space for all but the most senior of managers. . . 

Over a longer term, the average size of space leased has fallen by 21 percent during the past 10 years, according to a Property Portfolio Research September 2012 report. PPR also notes that green, transit-friendly space is increasingly in demand, suggesting that much of the existing space is obsolete and needs retrofitting. Those buildings that are able to bring in more natural light without extraordinary costs seem to offer the best opportunities for retrofitting.   

Decreases in total office consumption based on more-flexible work location patterns and higher utilization rates are underway, but they take time. The total demand for space will grow at a slower pace for the next few decades, as firms decrease space allocated per employee, but there will be substantial demand for better interiors more adapted to the newer style of working.

Over the next several years we will likely see a large spread in the space required per worker from the most efficient space users to traditional space users, so estimating the average sf per worker will be a challenge. The most reasonable estimates presume a continual but slow reduction in space per worker. For now, 200 sf to 250 sf per worker is still a reasonable estimate for most traditional firms, but at the same time, 100 to 150 sf is closer to what some of the larger public firms are now achieving.

Moving forward, we will see some firms achieve less than 100 sf per worker, but given the cultural impediments and the challenges of predicting growth rates, we are more likely to see figures average 150 sf to 185 sf per worker phasing slowly toward even lower figures at the end of the decade. This is a significant reduction is space per worker, but it parallels a need to retrofit much of the existing space to provide more collaborative team space and healthier, more productive environments.

At the end of the day, landlords are not selling space but rather productivity. More productive environments with better natural light, temperature and air controls, cleaner air and controllable noise are more productive and will command rental premiums.

The full article is here.