Will Densification Disrupt Office Space Development?
Over the past decade or so, the office market has seen a trend among corporate occupiers to shrink their footprint— doing more with less. During the recession, the trend of “densification” took hold and hasn’t let go even today as job growth continues to outpace office space growth. Now that densification is here to stay, could this mean that we’ll see disruptive innovation in office space development? We think so and here’s why:
- Fundamental Market Shift- Average space per employee has tightened from a target of 250 SF per employee a decade ago to approximately 175 SF per employee today. We continue to see this figure decrease and will likely be around 150 SF per employee by 2017. As the SF per employee ratio continues to decrease, this will continue to put added pressure on buildings and the systems that run them (HVAC loads, elevators, parking, common areas, restrooms, etc.).
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- Technology- Technology has spurred a rapid rise in the number of employees working from home which has eliminated the number of permanent desks needed in an office space. However, many studies indicate that working from home can be unproductive for business. To address these concerns, many businesses now offer free addressing environments which offers technology-enabled spaces to let employees choose where they work within a given space without being tied down to a specific desk or office.
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- Open Floor Plans- There is a move towards more open and collaborative office space environments, especially among millennials. The days of the “cube farm” are gone and those areas are being replaced with low-walled benching environments with a lot of natural light, glass, exposed ceilings, large cafés and spaces that offer numerous ways to work depending on the task at hand.
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- Co-working Spaces- As the entrepreneurial community flourishes, early-stage and venture backed companies will continue to need space to work with flexible lease terms. Shared office spaces like WeWork and Industrious will be home to a lot of these small companies. These environments offer a place where different companies work, share space and ideas, and avoid the isolation from the home office. Co-working spaces that can be shaped easily for multiple business uses while offering collision areas for the companies within its walls will continue to lease traditional office buildings at a rapid pace.
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New development projects that have the flexibility to accommodate ongoing densification in the workplace will gain a distinct, clear advantage over aging buildings that are becoming obsolete. However, those developers/owners of older product can and should be able to compete with newer, more expensive developments. The developers that repurpose buildings with amenity rich environments like gyms, lounges, coffee shops and other areas for the workforce to collaborate will appeal to many users. Even suburban buildings can be reimagined to offer urban types of environments to attract and retain talent. Those developers that think creatively to turn old spaces into new uses to meet the needs of corporate occupiers with densification goals in mind will be in the driver’s seat to secure the forward thinking businesses of the future.
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CONTACT US
Please contact us by email at heath.chapman@cbre-raleigh.com or don.shupe@cbre-raleigh.com or by phone at 919.831.8200 to obtain a CBRE Econometric Advisors Index Brief, as well as CBRE’s local 1Q 2016 Office MarketView Report. These reports provide key updates on vacancy levels, rental rates and employment trends within the Raleigh-Durham office market.
The commercial real estate office markets continue to rapidly evolve, and we make it our business to stay ahead of the curve. If you anticipate a change in your space requirements, have been contemplating a lease restructure, need an analysis of your current leased office portfolio or simply would like to set up a time to discuss our services in greater detail, please contact us.
We specialize in occupier services and are committed to delivering superior results for our clients.
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CBRE | Raleigh
555 Fayetteville Street | Suite 800
Raleigh, NC 27601
| 919.831.8200 | www.cbre.com/raleigh
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