Last week I discussed the current Chicago Office market. In the suburbs there is a fair amount of slow-moving inventory. But the city has strong demand for office space. Why is that? Are companies fleeing the suburbs for the city? Or maybe fleeing the state? Perhaps that is part of the reason. But I don’t think it tells the whole story.
Think about the traditional office as depicted in the popular show “Mad Men”. Executives each had their own office. Files were stored in giant metal file cabinets. Phones were tied to the desk with cords attached. If there were computers, they certainly were not something that could be used from someone’s desk, and they took up massive amounts of space…not to mention the equipment needed to keep it all cool. In addition, companies were large with individual departments housed on different floors of an office building. Each department had its own agenda and operated as a silo – isolated from everyone else, and no one knew what the other was doing.
Fast-forward to today’s work environment and you will find something significantly different. Recent studies have shown that the contemporary office user is looking for a different work environment than the model of the past. Four of the most significant factors affecting office usage today are collaboration, mobile technology/cloud storage, telecommuting, and urbanization.
- Collaboration is more important than ever in order to remain globally competitive and to carry out the company’s missions efficiently. This results in less walls, and more common office space. In many cases, companies are no longer assigning employees to specific spaces. Instead, groups of individuals working on like-projects can congregate in common areas and share information that is beneficial to the group. Some feel that a more informal office design promotes creativity and reduces stress. Certainly the “silos” of the past are broken down, and open communication is encouraged.
- Mobile Technology/Cloud Storage allows us to do our work anywhere. Tethering ourselves to our desks is a thing of the past. Also we don’t need to go to the office to access and lug around large files folders. Cloud technology and cell phone technology have changed the office landscape forever; this results in state of the art infrastructure including WIFI, charging stations, etc., and less needed space.
- Telecommuting is a natural extension of the proliferation of mobile technology and cloud computing. It is a work arrangement in which employees do not commute to a central place of work. Studies have shown that 4.4% of American workers telecommuted in 2012. That number has jumped to 24% today. The percentage of employers who offer telecommuting has increased from 13% in 2006 to 59% in 2011. Studies have also shown that while only 28% of non-telecommuters work more than 40 hours in a week, that number jumps up to 53% for telecommuters. This further decreases the need for large spaces.
- Urbanization – In 2013, there was an increase of 2.3 million people living in metro areas, over 2012. One reason for this is the population shift of millennials and baby boomers. Millennials tend to prefer the convenience of urban style living. They tend to rent longer and do not need to have large living spaces. Baby boomers, who, in many cases, are new “empty nesters” or are retiring, are downsizing, and 75% of them prefer urban settings. These two groups prefer their amenities in close proximity to their homes. And the same applies to the office commute. Due to the proliferation of a more bike-friendly city and uber taxis, car ownership is becoming less of a necessity, and these groups increasingly prefer smaller housing with a shorter commute to work. The result is strong demand for city office space.
The suburban office market is still viable, but it needs to respond to market trends. Most likely, walls need to come down in favor of a more open collaborative concept. There will probably need to be areas designed to support socialization and wellness (hydration stations, snack bars, etc). The expectation is that the workplace becomes an extension of the company culture and the people that feed that culture. In addition, individual office spaces need to be smaller, and the infrastructure needs to be in place to support the technology. Despite urbanization, the suburban office market can thrive by updating current office space to state of the art standards, or perhaps relocating to high density residential areas, that will allow people to easily commute.
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