CREJ - Office Properties Quarterly - April 2015

The evolution of office space utilization

Sarah Carver Research manager, Avison Young, Denver

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In today’s rapidly changing office climate, it is often difficult to determine how much space a tenant will need when they are relocating. With the rise of telework opportunities and alternate office arrangements, it is not always as cut-and-dried as a specific square footage per person. This evolution presents a unique challenge for commercial real estate brokers and tenants alike, and they must work closely to determine the most effective course of action.

Denver Market Space Utilization Study

Through phone surveys of Denver office tenants and U.S. General Services Administration data, the current prevailing standard average workspace is between 175 and 200 sf per person, with the smallest reported space at 64 sf. This is down from recent years. In 2010 the average size per person was between 225 and 250 sf. On the current trajectory, this average could be down to as low as 150 sf in a few years.

Local survey respondents typically fall within the nationwide norms, with law firms reporting the highest average space per sf per employee, followed by engineers, financial institutions and architects. Many Denver companies are embracing telework opportunities, with 60 percent of the study group reporting that a portion of their employees work from home on a regular basis. While many employees have the opportunity to telework full time, they often choose to come to the office for a portion of the day and still require desk space.

Unsurprisingly, the industries in the Denver market that tend to telework the least are those requiring more space per sf per employee. These organizations often need face-to-face time with clients, have shared storage space and require regular contact with coworkers.

Industry shift. Certain industries stand out as most likely to make a shift in office space use. Technology companies were among the first to embrace densification of their space, said Joe Sigdestad, principal at Avison Young.

Tech companies have the ability to telework and use established telework centers, and shared office space is very common. Even traditionally space-hungry users are making moves to decrease their space use. “Efficient space utilization has even crossed into the legal field,” said Sigdestad. “Historically, law firms have had the highest utilization ratio per attorney of over 1,000 rentable square feet per attorney.

Today the goal is much closer to 750 rentable square feet per attorney.” Other industries that have a reputation for being old-fashioned are slowly making a shift as well. The government, for example, mostly uses the private office setup for upper level associates, however, steps are being made to reduce their footprint and increase efficiency. Manufacturing companies are also finding they can operate in much less space than before.

Key motivators for tenants. As rents increase in Denver, brokers see clients reevaluate their space needs more and more. Companies are required to do more with less space to lower overhead costs and increase efficiency. Not only do open-office concepts save rent money, but also they reduce utility and maintenance costs.

Aside from financials, companies are driven to remain an attractive place to work. Retaining top employees is critical to a company’s success, and a flexible work environment and teleworking is very attractive.

Additionally, open space plans with natural light encourage collaboration, and allowing every employee to enjoy views is better than a select few.

Strategies for the effective broker. The evolving concept of office space utilization presents certain challenges a tenant rep broker must face early in the process to determine the size needs of their clients. In initial conversations, it is best to keep the conversation simple to determine how much space they are currently using per employee. One suggestion is to find the gross sf of the entire office and divide it by seats, said David Hurtado, Avison Young principal project manager. By evaluating this baseline square footage, you have a solid starting point for your future conversations. Next, it is key to determine how the tenant envisions their space and to involve a project manager and architect for best results.

There are also ways to aid in the evolving space trend as a landlord rep.

It is important to educate the landlord on the changing face of office space and make the advantages of leasing to open-plan users clear. A building owner who embraces densification and prepares their building for these users will easily set himself apart from the competition. Being viewed as a progressive owner will speak volumes for the property and attract tenants who desire better amenities.

‘Historically, law firms have
had the highest utilization
ratio per attorney of over
1,000 rentable square feet per
attorney. Today the goal is
much closer to 750 rentable
square feet per attorney.’

– Joe Sigdestad, Avison Young

There are many ways brokers can use the shifting office space trend to their advantage.

“A big area of opportunity is to assist companies ‘right-size’ their existing space by becoming more efficient and effective at using it,” said Justin Rayburn, principal at Avison Young. “Right-sizing also allows us to help our clients put more money to the bottom line.” By showing tenants the many ways brokers can assist, in addition to negotiating a lease, a broker’s value is evident and the tenant is more likely to come back again and again for various real estate needs.