Trends in Commercial Office Space

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Advancements in technology and the economy are changing the needs of today’s workforce as well as the needs for commercial office space. But, change can be good, especially when it comes to commercial space on our Main Streets. Trends from design to location are making smaller, older buildings located in commercial districts attractive options for conversion into commercial space. Main Street communities are in a unique position, given their building stock and neighborhood characteristics, to take advantage of new trends in commercial office space design.

  • Trend: Tenants are reducing their office space needs by using less space for each employee. The recent economic downturn has prompted businesses large and small to re-evaluate their real estate needs. For many companies, their office space lease expenses are second only to salaries in total annual costs. The need or desire to cut expenses has led office tenants to look for flexibility in office space, with an overall goal of reducing the amount of space per employee. CoStar, the premier real estate information company, recently reported that even though overall rents nationally are currently 11 percent below their long-term average, tenants are remaining conservative in assessing their space needs; they aren't increasing their space to take advantage of favorable lease rates.
  • Trend: Office space design and layouts are dramatically shifting. Over the past few years, the look of the typical office space has been changing. The standard, high-wall office cube for a single employee, laid out in rows across the floor in a Dilbert-like setting, is being replaced by smaller workstations with lower wall separators, or none at all. The removal of these barriers is designed to stimulate more employee interaction and collaboration. Instead of conducting meetings in individual cubicles or formal conference rooms, companies are using the open office space that's left from reduced individual workstations to create informal meeting areas to mimic a café-style feel. This open space has become more valuable as technological advances in communication devices and Internet connectivity now allow workers to be un-tethered from their actual desks. Many people today can accomplish their work anywhere inside or outside the office. A recent Wall Street Journal article detailed how “creative” office space with open floor plans in San Francisco had a 2.54 percent vacancy rate, compared with a 10.55 percent vacancy rate for more traditional spaces with closed-door office layouts.
  • Trend: Landlords and tenants are more sophisticated about sustainability and the bottom line. Building owners and tenants are becoming more aware of the costs related to office space occupancy, both in terms of cost and employee satisfaction, according to David Bell of Bell Architects in Washington, D.C. The parties responsible for paying utility costs are learning that the characteristics of their building will have direct effect on those costs. Access to sunlight can lower lighting costs, access to fresh air can reduce cooling costs, and the thermal mass ability of a building to retain and release heat can reduce heating costs. Company absenteeism and health costs can be reduced by providing employees with a more attractive office that has better access to natural light and air versus more contemporary built office spaces. Buildings situated in walkable neighborhoods that offer basic services, such as dry cleaners, health clubs, and restaurants give building owners more flexibility since they don’t need to provide these amenities in their buildings to meet their tenants’ needs. Company managers are learning that employees with access to local shopping and services have an increased incentive to spend more time in the office. Some companies are even beginning to offer their employees discounts to local businesses.
  • Trend: The redevelopment cycle of some neighborhoods has now reached the commercial office space stage. Downtowns and neighborhoods that have been undergoing revitalization and rehabilitation for several years are becoming attractive locations for commercial office space development, says Thomas Miller of BVH Architects in Omaha, Nebraska. There is a typical pattern to many places that have seen disinvestment for a long time. First, these neglected space often appeal to artists seeking low rents and to nonprofit organizations looking for inexpensive building space. Next come the residential pioneers who like the gritty yet interesting architecture and urban density. If enough residential growth occurs, then restaurants and retail outlets will open. The next phase is often the development of office space, as the area will have potential employees and a set of amenities to appeal to employers in the area. Buildings that stood derelict in neighborhoods experiencing this pattern of growth are now being considered for office uses.

The Great Recession of 2008 has caused companies throughout the country to re-evaluate their real estate needs and reduce space requirements. The emerging trend in office space design of smaller, open workstations with more collaborative shared space allows formerly obsolete buildings to be re-designed into contemporary office space. In addition, the inherent positive environmental attributes of older buildings are appealing to both tenants and landlords who are learning about the potential financial and health benefits these spaces offer. These trends offer Main Street communities exciting new opportunities to transform and re-use historic structures, while giving landlords and tenants the ability to create 21st-century office space that meets their business needs.

Main Street building owners should be prepared to tell potential tenants and commercial real estate brokers how their buildings and neighborhoods can meet these trends. Sample space-planning layouts can be commissioned to show a prospect how new design trends can be utilized within the building. The potential energy- and money-saving attributes of the buildings should be highlighted, as well as the local stores and services that are within walking distance for future employees to use. A pro-active approach is critical in appealing to new types of tenants who are looking at building options that they might not have considered just a few years ago.