Tenants Are Changing – But Their Offices Can’t

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Over the last few decades, we have seen businesses undergo major changes in the way they operate. Namely, companies are changing the size (and shape) of their physical footprint; companies are demanding less enclosed offices and more open, collaborative space. They are moving from office to cubes and from cubes to open-floor trading desks, decreasing their space-per-employee requirements and forcing building owners and landlords to come up with creative ways to accommodate such tenants. For example, in the 2010 the average space per employee in the US was 225 SF; by 2018, that number is expected to drop below 185 SF. Some companies in Atlanta, like Paperless Post, are already less than 100 SF per employee.

The problem is that it is a lot easier to reorganize the desk layout in a company’s office than it is to blow out walls, change floor plates, and reorganize entire buildings. New companies seeking space are demanding floor plates and amenities that older buildings simply do to have. Another issue is that older buildings simply to do have the infrastructure to support to need technology firms and businesses require in order to conduct business. We’ve seen several cases where companies are unable to find a standing building to accommodate their needs, so they build a new building or complex , which eventually creates negative absorption in the market.

So what’s going to happen? Some speculate that a number of the older Class A buildings will be reevaluated and designated as Class B buildings. We’ve seen several companies sacrifice prime in-town locations and move to buildings farther out simply because they are newer and can better accommodate the layouts and technology they need. The bottom line is that increased space efficiency leads to decreased demand for office space, and if building owners want to keep their low vacancy rates they are going to have to find ways to adapt to the changing needs of 21st century business.

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