Fairfax County working group finally acknowledges shrinkage in office space per worker.

The following is the text of an e-mail Reston 20/20 co-chair Terry Maynard sent to Board of Supervisors Chairman Sharon Bulova today concerning Fairfax County's first official recognition that the space per office worker is shrinking and the tremendous implications that belated decision has on planning.  

From:   Terry Maynard

• Today at 1:48 PM

To: 

• Chairman Sharon Bulova

CC:

• Board of Supervisors
• Planning Commission Fairfax County
• Tom Biesiadny
• Fred Selden
• Tim Thompson
• and 6 more...

Subject: "Reduction in Space per Employee"

Dear Chairman Bulova,

I was pleasantly surprised in reading the report of the County Board-appointed Fairfax County Building Repositioning Working Group, "Office Building Repositioning and Repurposing:  Fairfax County Building Repositioning WorkgroupReport," the brief section (p. 9) with the subject title.  It specifically states,

A significant trend occurring nationally and affecting the office market in Fairfax County is that the average amount of leased space per employee is shrinking.  This is attributed to more efficient office design, increased ease of teleworking, and hoteling, all of which result in many types of work being done in locations other than the traditional office environment.  Average footprints are anticipated to shrink from 225 usable square feet (USF) per person in 2010 to 150 USF per person by 2017, a reduction of 40 percent.

This is exactly the message I conveyed to you several times more than three years ago in questioning why Fairfax County planners continue to use 300 gross square feet (GSF) for office space planning purposes.  (These letters and related articles are available on the Reston 20/20 blog.)  By our calculation, Usable Square Feet (USF) used in this report is approximately two-thirds of the value of GSF.  In this case, the County's implicit planning assumption is that there is about 200 USF/office worker--slightly lower than the 2010 average laid out above, but 25% higher than the expected USF/worker next year. 

To be consistent with that expected average next year, the Fairfax County GSF/office worker planning assumption would have to drop to no more than 225 GSF/office worker.  This is, in fact, the planning metric used by Arlington County, which dropped its space per office worker planning assumption from 250 GSF/worker to 225 GSF/worker a couple of years ago.  With office space per worker continuing to shrink, you might even want to use a planning assumption of 200 GSF/office worker.

The County's continuing failure to address this reality has critical implications for planning the associated infrastructure, none possibly more important than transportation planning.  Right now, the FCDOT is hard at work in its Reston street planning effort (RNAG) and using the 300 GSF/office worker as one of its guidelines for calculating future traffic on Reston's station area streets and beyond.  This includes calculating office-driven traffic for the 29.7 million GSF of office space planned in these areas. 

• At 300 GSF/office worker, that's 99,000 potential office employees.
• At 225 GSF/ office worker, that increases to 132,000 potential office employees, a one-third increase.
• At 200 GSF/office worker, that increases to 148,500 potential office employees, a 50% increase.

The one-third (33,000) increase in the number of prospective office employees at 225 GSF/employee will have a tremendous impact on traffic, transit, and other transportation means in Reston's station areas that is not now being considered.  So while FCDOT is planning to reduce Reston station area traffic standards from LOS "D" to an urban standard of LOS "E," the fact of the matter is implementation of the current plan will result in a massively gridlocked LOS "F."  Indeed, just as there will be one-third more potential employees, the potential costs of meeting any reasonable traffic standard are also likely to increase by at least one-third--actually substantially more as marginal costs tend to rise.

No doubt similar consequences will be felt in Tysons and other urbanizing areas of the County, aggravated by the recent passage of the FAR 5.0 ZOA.  Quite simply, the County can't afford to meet the infrastructure requirements the continuing use of this inaccurate planning assumption will create.

The Board, the Planning Commission, and Fairfax County's Department of Planning and Zoning need to step up to the adoption of realistic planning assumptions, probably also on dwelling unit size (increased to 1,200 GSF from 1,000 GSF in the Tysons and Reston planning efforts).  Otherwise, the County will experience gridlock nearly county-wide, inadequate school facilities, crammed public parks, etc. 

While you (and certainly not I) will not be around to see this massive planning failure occur, it will happen in the absence of sound planning.  I strongly urge you to take action now to assure that this doesn't occur for the sake of those--including our families--who will be living here long after we depart. 

In the meantime, I wish you the best of the holidays with family and friends and a happy, prosperous, and productive New Year.

Sincerely,

Terry Maynard, Co-Chair

Reston 20/20 Committee

BCC:  Reston community leaders and local news outlets

Washington’s sputtering office market has developers scrambling, WaPo, May 19, 2016

This Washington Post article by Jonathan O'Connell highlights the erosion of the suburban office market as many CRE firms look elsewhere to grow.  The "money line" in the article appears about half way through it:

“People are just not taking as much office space anymore,” (Savills Studley's Thomas) Fulcher said. “Even if companies are growing, they are not taking as much space.”

So rather than continue to try to lease the buildings, some of Washington’s most tenured firms are selling them off or moving on to greener pastures. . . .

So what is the situation now:

Record-high vacancies have become the new normal as employers curb their appetite for space and shift their attention to more urban locales. Some office buildings have been empty so long that several of the region’s stalwart development firms are tearing up their plans and selling off large chunks of property at bargain-basement prices in favor of pricier, more centrally located buildings.

Buildings began to empty during the recession, and they took another punch when the government shut down and federal spending slowed. The local economy began to pick up last year, but the recovery has been spotty, with construction cranes dotting the Washington skyline but absent from many parts of the suburbs, particularly areas far from mass transit. . .

The pain for Washington building owners is most acute in the suburbs, where vacancy rates have been on the rise for five years in a row and are about double that of the District. By one count, there are 151 spaces of 50,000 square feet or more available in Northern Virginia alone.

But downtown has not been spared; . . .

We have explained this evolving situation to Fairfax County Board Chairman Sharon Bulova, the rest of the Board of Supervisors, and the Planning Commission in numerous letters, but they all still are planning hundreds of millions of additional square feet of office space across the county, including some areas--such as the Richmond Highway Community Revitalization District--that do not even have access to Metro.  We received one rather pathetic response from the County Planning Staff that defended the County's far outdated standard of 300 gross square feet of office space per worker (reality is less than 200 SF/worker and as low as 100 SF/worker) and the outrageous County-sponsored taxpayer-paid office employment forecasts of GMU's Center for Regional Analysis that drove Tysons' and Reston's master planning efforts.  The same also occurred in Reston's Lake Anne redevelopment plan that has sense folded like a cheap suit.  It has happened in virtually every CRD, CBC, CRA, and TSA in the County as County leaders attempt to build and tax their way out of their poor budget management record.

Now the huge and intentional planning development errors are about to be augmented by an equally faulty one-size-fits-all zoning ordinance amendment (ZOA) that will irrevocably permit FAR 5 development in more than 20 County localities, including Reston's TSAs and Richmond Highway CRD.  That ZOA, left unamended, could permit tens of millions of additional square feet of office space in EACH locality--and that doesn't count Tysons which is in a category all its own. 

It is astounding to us at Reston 20/20 that County officials continue pursuing a policy course that will lead to more vacant office buildings, more congestion and pollution, and greater taxes on the County's residents in the face of overwhelming evidence that the office market has stagnated for the foreseeable future and the repeated judgments of experts in the CRE industry and amateurs like ourselves that this is the case. 

The County Emperor really is wearing no clothes, but none of its sycophants is willing to drive that point home.  In fact, developers keep demanding more density.  The farther we go, the worse the situation will become.

SELLING IT: FCEDA goes off the deep end selling the County's office space growth.

An article in InsideNOVA.com by Brian Trompeter, who regularly reports on Fairfax County business matters, details a presentation by FCEDA's Director of Real Estate Services Curt Hoffman to the Tysons Regional Chamber of Commerce entitled, "Commercial real estate continues headlong growth in Fairfax."  The article begins:

New office and mixed-use projects are being built like gangbusters in Fairfax County and the county’s economy remains formidable, a local real estate expert said May 11.

More than 2.6 million square feet of office space now is under construction, 83 percent of which has been leased in advance.

“It’s kind of like going to the car dealer and buying your car off the assembly line,” said Curt Hoffman, director of real estate services for the county’s Economic Development Authority, who briefed Tysons Regional Chamber of Commerce members during a breakfast meeting at the agency’s Tysons office. . . .

Companies are flocking to Fairfax County . . . Hoffman said. . . .

Wow!  How could life get any better for a developer and the County's economy and property tax revenue flows?

Just a tad of perspective shows how bogus the growth in the County's office space is.  FCEDA's data shows that, since 2006, the County has added more than 11.5 million square feet of office space.  At the same time, the amount of vacant office space has increased by an almost identical amount:  11.1 millions SF.  In fact, the amount of occupied office space in Fairfax County has increased by a measly 319.5 thousand SF--enough space to house 1,065 new office workers--112 new office workers per year--using the County's office space per worker planning assumption (300 GSF/worker).

The fact of the matter is that businesses are merely moving their employees from older buildings to new ones as FCEDA's mid-2015 data shows.  (Although it is now mid-May 2016 , FCEDA has not yet published its year-end 2015 data update.  CRE brokers routinely publish this office data quarterly with a one-month delay.)  Over the same period, the office space "available for relet" has grown by 10.9 million SF.  Available new office space has grown by less than 200,000 SF.

Against that backdrop, Hoffman called the County's 16.2% office vacancy rate (and that is "direct"only; "indirect" vacancies--unoccupied but leased space--adds two percentage points to that rate) is "near" the "healthy" range of 10%-15% range.  We call bullshit!  From a developer's perspective, that rate should be under 10%; the lessee wouldn't want to see it below 7% as rents would skyrocket.  In fact, over the 35 years the County has tracked its office market, the average direct vacancy rate has been 9.8%.  There is nothing healthy about an office market where the vacancy rate exceeds 10%--and the County's overall vacancy rate now exceeds 18%.

And office vacancy is becoming a larger problem for the County.  The office vacancy rate has more than doubled since 2006 from 7.7% to 16.5%.  Worse, it has grown every year since 2010 (then at 13.3%) when the national economic recovery began.  If the office market can't strengthen during a period of national economic growth, its future as a driver of growth in the local economy is very much in doubt, even with the arrival of the Silver Line in the Dulles Corridor.

One point Hoffman makes is that 73% of the current office space is becoming obsolete, meaning only that it is more than 20 years old--and “that’s the next market (replacing office space) we see taking off,” Hoffman said.  We disagree for several reasons.

• Office job growth in the County has been and will continue to be slow, if not stagnant, thanks largely to Congress' inability or unwillingness to spend on larger government and government contracting.
• Office space size per worker will continue to shrink.  Although the County continues to insist on using 300 GSF/office worker as its office space planning metric, the fact of the matter is that office space per worker is shrinking dramatically.  Some estimates say as low as 100 SF/worker.  We believe 200 GSF/worker is a comfortable estimate of current and future space per worker for at least a decade.  
• Office-type jobs, especially business and technology work, are shifting to other markets for a variety of reasons, including the fact that the internet means that much of this business can be conducted from anywhere in the world.  

As a result, we anticipate that a significant share of the obsolete office building market, possibly a third or more, will be re-built (possibly years from now) as high-density residential as that market continues to show a relatively strong demand.

We appreciate that Hoffman's job is to sell the County's real estate, but he--and many others in County leadership positions--need to provide more credible presentations on the state and the direction of the County's economy, including its office market.  The continuing failure to provide credible information will itself lead corporations to move their businesses to other locations whose leadership is more candid about their business conditions and prospects.  

Here's the FCEDA data:

Countywide Office Space Trends: 1980–2015 (Square Feet) Year Standing Inventory 1 Vacancy Rate (%) Total Leased 2 New Leased Relet Leased Total Direct Available New Available Relet Available 1980 20,567,000 1.7 1,400,000 NA NA 343,086 279,539 63,547 1981 27,900,000 2.9 2,623,579 1,486,919 146,046 810,950 439,406 371,544 1982 30,750,000 4.5 2,639,313 1,193,946 451,186 1,374,534 866,906 507,628 1983 32,100,000 2.9 2,312,379 1,414,951 360,211 933,012 366,792 566,220 1984 35,100,000 7.3 3,318,178 1,706,050 562,293 2,558,566 2,018,716 539,850 1985 42,800,000 9.4 5,107,357 3,719,570 440,487 4,036,662 3,283,319 753,343 1986 48,700,000 9.4 5,889,741 3,908,799 339,682 4,555,065 3,119,637 1,435,428 1987 53,616,000 8.8 5,475,880 3,651,588 942,557 4,701,055 3,087,638 1,613,417 1988 58,073,000 10.8 5,014,401 3,046,598 1,004,913 6,263,547 3,818,738 2,444,809 1989 63,575,000 15.2 5,973,710 3,224,384 1,353,114 9,645,834 4,227,527 5,418,307 1990 67,139,000 18.3 5,006,377 2,202,932 2,424,145 12,255,516 5,118,433 7,137,083 1991 72,702,000 16.8 5,535,950 2,374,087 3,141,863 12,185,419 3,829,149 8,356,270 1992 73,056,000 14.8 4,854,778 1,433,064 3,421,714 10,788,508 2,652,612 8,135,896 1993 74,397,000 12.4 5,272,604 1,393,415 3,879,189 9,201,590 1,409,847 7,791,743 1994 75,562,432 9.9 6,306,117 1,290,152 5,015,965 7,490,605 651,098 6,839,507 1995 76,074,620 8.5 5,261,893 498,137 4,763,756 6,458,580 308,062 6,150,518 1996 78,265,573 6.2 7,040,085 1,316,827 5,723,258 4,908,932 77,775 4,831,157 1997 79,617,676 4.3 6,196,885 1,959,447 4,237,438 3,390,293 19,177 3,371,116 1998 82,088,287 4.1 6,991,158 3,810,783 3,180,375 3,392,909 531,855 2,861,054 1999 88,375,053 4.8 9,264,808 5,910,855 3,353,953 4,238,492 1,340,336 2,898,156 2000 93,563,753 3.5 12,750,968 6,918,762 5,832,206 3,236,371 1,007,213 2,229,158 2001 97,602,908 6.4 5,174,234 2,606,024 2,568,210 6,281,688 2,312,291 3,969,397 2002 100,912,347 12.1 7,648,790 1,022,910 2,631,385 12,176,938 3,291,394 8,885,544 2003 101,507,385 11.2 10,570,315 1,788,402 4,898,701 11,393,801 1,870,915 9,522,886 2004 102,117,697 8.6 10,969,819 1,762,757 6,028,830 8,764,801 919,191 7,845,610 2005 103,520,646 7.8 9,659,060 537,974 5,920,239 8,054,510 1,053,457 7,001,053 2006 105,054,801 7.7 10,805,683 2,249,866 7,569,360 8,115,057 1,155,235 6,959,822 2007 107,232,650 9.2 9,382,013 1,378,208 6,832,122 9,857,339 2,164,415 7,692,924 2008 111,189,301 12.1 9,976,277 1,808,055 7,146,620 13,422,946 3,419,220 10,003,726 2009 112,556,702 14 10,330,158 1,162,887 8,425,631 15,723,157 3,076,675 12,646,482 2010 113,191,835 13.3 13,586,158 1,317,120 11,590,346 15,091,196 1,926,139 13,165,057 2011 113,624,952 13.7 11,656,935 1,300,674 9,694,529 15,600,787 1,267,677 14,333,110 2012 114,056,515 14.4 10,717,111 1,251,127 8,833,486 16,454,250 1,039,607 15,414,643 2013 114,771,222 14.4 12,280,230 823,756 10,307,898 16,577,368 1,404,234 15,173,134 2014 116,238,615 16.3 9,833,053 521,971 8,711,025 18,897,111 1,498,179 17,398,932 2015 3 116,509,060 16.5 5,031,099 195,295 4,459,714 19,205,621 1,317,831 17,887,790 1.  Includes inventory outside submarket areas 1980-2000 only. 2.  ln some years, total leasing reflects the preleasing of buildings under construction and about to be constructed, as well as new and relet space. 3.  Through June 30, 2015.
								Relet Available
								63,547
								371,544
								507,628
								566,220
								539,850
								753,343
								1,435,428
								1,613,417
								2,444,809
								5,418,307
								7,137,083
								8,356,270
								8,135,896
								7,791,743
								6,839,507
								6,150,518
								4,831,157
								3,371,116
								2,861,054
								2,898,156
								2,229,158
								3,969,397
								8,885,544
								9,522,886
								7,845,610
								7,001,053
								6,959,822
								7,692,924
								10,003,726
								12,646,482
								13,165,057
								14,333,110
								15,414,643
								15,173,134
								17,398,932
								17,887,790

The FAR 5.0 Zoning Ordinance Amendment, A Reston Perspective: Its Meaning, Appearance, and Some Impacts

   Brief on FAR 5 Zoning Ordinance--UPDATED

Why the Future of Work Is at Home, Pacific Standard, February 12, 2016

We have argued that one reason that the office space per worker requirement will shrink in the future is that a higher percentage of workers will work from home.  This article takes that concept to a whole new level, highlighting why it could actually improve employee and company performance.

Here are some excerpts:

Why the Future of Work Is at Home

Even a cursory look at the social, environmental, and economic impacts of working from home indicates that even more people could and should be.

Alana Massey

Feb 12, 2016

Once upon a time, working from home seemed a romantic and highly exclusive option for a luxury creative class. It was for writers and painters who sauntered out of their bedrooms at 10:30 a.m. to drink French roast coffee and eat locally made croissants and jam while lounging on wrap-around porches in Maine, before repairing to the typewriter or canvas. This has never been the reality of working in the home, of course. Domestic laborers and caregivers have always worked in the home, often without compensation and certainly without the leisurely hours of the phantom creative class sipping coffees over art. But the sharp decline in long-term employment at one company and the rise of telecommuting options means more workers than ever are doing their jobs in the same places they sleep. Even a cursory look at the social, environmental, and economic impacts of working from home indicates that even more people could and should be. . . .

. . . As more companies become privy to the psychology impact of office life on their workers, a new emphasis has been placed on creating positive and engaging work "cultures" and "experiences" in the workplace. But the issue is not just that spending five days a week in a negative office space with symbolic architecture is bad for workers: It is that five days in any office is bad for workers.

 

The group that worked at home demonstrated a 13 percent increase in performance and a nine percent increase in overall time spent on their work calls.

Last year, a Stanford University study of Chinese travel agency CTrip took 503 call center employees and divided them in half, one group working from home four days a week with one day in the office and the other half remaining in the call center as a control group for nine months. The group that worked at home demonstrated a 13 percent increase in performance and a nine percent increase in overall time spent on their work calls, due in large part to the reduction in time needed to take breaks and a decrease in sick days. Yet the study also found that those working from home were less likely to be promoted than their in-office counterparts, indicating that management continues to value hours clocked at one's desk over actual worker output. . . .

The solution to obsolete office spaces does not require wholesale abandonment of the office but increased flexibility about what it means to be an employee. Major corporations need not surrender their downtown high-rises in defeat, but they do need to approach these spaces differently to remain relevant. One solution is relying on smaller, more permeable office spaces based on the co-working space models that were once the exclusive purview of freelancers and small companies. The management of these spaces has become easier as co-working software management tools like Cobot have scaled up to manage larger companies. . . .

A cynical view of the state of the American labor force is that office parks and high-rises housing businesses are little more than glorified daycare centers for workers that suck fuel and waste usable land because management teams do not trust their employees enough to work without in-person supervision. A more forgiving view is that the American labor force has inherited spaces and conditions that simply don’t fit their needs but that are still worth attempting to salvage or re-imagine. The downsized office space should not represent a company defeated but a company resurrected as an exclusive destination for workers whose professional potential is recognized as inborn rather than unlocked only at their desks. It's time to recognize this as a reality of modern work rather than as a romantic notion.

Click here for the rest of this article.  

The future of work space? WaPo takes a photographic look at Facebook's new headquarters.

In an article yesterday, the Washington Post's Todd Frankel provides a photographic tour and article about Facebook's new headquarters (Building 20) in Menlo Park, CA.  The 430,000 square foot workspace is entirely open--the largest open-office workspace in the world.  Housing 2,800 employees means that each employee has about 154 square feet of workspace at the core of which is a small cubicle.  It is not clear whether that square footage is "gross," "interior gross," "leasable," "usable," or some other square footage metric.   The largest the gross square feet (GSF) per employee could be (in the unlikely case that this metric is for usable workspace), however, is 230 GSF/employee--the space actually occupied per employee (not restrooms, hallways, elevators, walls, etc.).  We expect it most closely matches the "interior" square footage metric, suggesting that each employee has 203 ISF/worker.

The main stairs to Building 20. Photo by Nick Otto/For The Washington Post

Yet, as we have noted more than a dozen times in this blog, Fairfax County's Department of Planning and Zoning (DPZ) continues to assert for planning purposes that office workspace will be generated at 300 GSF/employee.  This example provided by one of the geekiest of the Silicon Valley high tech companies--the kind of technology-driven company that the Fairfax County Board of Supervisors would like to see come here--illustrates again how outrageously high that 300 GSF/worker assumption is.  In looking at dozens of similar leases, acquisitions, etc., our finding has been that the average GSF/employee is--and will likely continue to be--about 200 GSF/employee.

The 50% difference between the DPZ office space planning assumption and the reality of new office building usage as reflected in the Facebook headquarters and dozens of other leased or owned office buildings here and around the world will have a profound negative impact on development in Reston and other County TOD areas.  A new 100,000 GSF office building will allow about 50,000 new jobs, not the 33,333 jobs DPZ would assume.  That means 50% more traffic on local roads, 50% more workers using already under-allocated park space in and around TOD areas, 50% more environmental deterioration, and more. 

Until Fairfax County starts being realistic about the office workspace of the future, all of its urbanizing areas will be at risk of being overwhelmed by unexpected and unplanned for workers. 

The article itself provides a good look at both the pros and cons of the open-office workspace--and its seeming inevitability despite the complaints of employees.  You can read the full article and see several more photos here.