Will You Need More Office Space?
Naman and Zoccola discuss trends shaping the industry
At the recent 2025: A Vision for Commercial Real Estate Symposium in Washington, DC, Katya Naman, CCIM, senior vice president, Lowe Enterprises, Inc., and BOMA International Chair Boyd Zoccola, executive vice president, Hokanson Companies Inc., presented an outlook on what the next five years hold for commercial real estate. They identified several trends, including an increase in density in office buildings, the rise of transit-oriented development and the need for green incentives. The program featured experts from academia and industry to debate key factors– technology, globalization, sustainability and demographic shifts—and how they will affect the workplace and the workforce over the next 15 years.
The Workspace
Naman moderated a diverse panel featuring speakers from government, architecture and corporate real estate advisory firms, who discussed workspace trends and the potential demand for office space in 2025. Mobility was at the heart of the discussion, with all panelists agreeing that teleworking will continue to gain momentum.
As teleworking becomes more prevalent, many companies will need less space per worker. GSA’s Chief Asset Officer Gavin Bloch spoke about the agency’s mandate to increase teleworking among employees and dramatically increase density in their buildings. James B. King, AIA, LEED, AP, principal, AREA Advisor LLC, discussed a recent thesis project on the impact of teleworking on demand for office space written by a student in Georgetown’s real estate program. “The thesis concludes that there will be no need to develop new buildings to accommodate workers in the future—the space already in existence will need to be reconfigured to fit future needs,” he explained.
The key to future success in commercial real estate, the panelists agreed, is innovation. Property management firms will also have to think carefully about how they can provide the spaces and services that future tenants will need. Commented Martha A. O’Mara, PhD, CRE, managing director, Corporate Portfolio Analytics, “To compete, landlords are going to have to think about what they do besides offer plain vanilla office space.”
The Workforce
BOMA President Henry Chamberlain, APR, FASAE, CAE, moderated a panel that looked at the Workforce in 2025. Chamberlain kicked off the discussion by noting that as productivity within companies continues to increase, developing and retaining a talented workforce is a core priority and challenge for commercial real estate firms. Panelists discussed how the goals and priorities of an emerging workforce are helping firms evolve to meet new expectations.
“Technology is critical and archaic systems will be a deterrent to candidates,” said Matthew A. Metro, principal, The Maison Group Inc., who also noted that companies should empower employees to use new technologies and media to market their companies and attract the best talent.
Panelists also discussed how the concept of career development is changing with the incoming workforce. “The corporate ladder concept is starting to go away,” suggested Kristen Reese, director of talent acquisition, Bozzuto Group. “Satisfying careers don’t necessarily have to go up, but tend to go more in waves of different experiences.” Reese also explained that the hierarchy trickle down of information is being replaced by more collaborative experiences.
But what is ultimately going to attract and retain the best talent? Reese noted that it may come down to something very basic, “If someone is looking for a job, they are going to want to know if people are happy working there.”
AWS: From Indictment To Endorsement
Alternative workplace strategies such as teleworking began as a corporate cost-saving measure, and cost savings remains a primary driver, but two other factors have emerged to make the trend more compelling for employers, King noted.
“Companies are focusing on two things: employee satisfaction, and productivity and teaming. They are increasingly looking at their office space to help them attract and retain the best talent,” King said. One of the ways companies are changing their corporate environments is by combining the work environment with elements of a home environment preferred by new generations of workers, as opposed to baby boomers who prefer to keep the two separate.
Perkins & Will Principal Joan Blumenfeld agreed, noting that Gen-Xers and Millenials are more comfortable blending work and home life than their baby boomer parents. To appeal to key employee demographics, companies are increasingly changing their workspace design to reflect the younger worker values, incorporating more open floor plans and “common areas” with extensive seating and collaboration areas, while providing employees the technology to connect from anywhere.
Calling it the “era of the bench,” Blumenfeld said the focus on spatial efficiency is all about firms using enhanced mobility in ways to untether employees from their desks and improve collaboration across departments and disciplines, as well as to achieve cost savings and increase employees’ efficiency during the current downturn. “Layer on top of that the fact that all of our large corporate and institutional clients are embracing strong social responsibility and sustainability programs. Virtually all our work today is LEED accredited,” which holds important implications for new and existing space, she said.
Blumenfeld also noted a distinction in workplace trends among different types of firms. Large-scale financial services, consultants and other professional services firms place increasing value on supporting their employees outside the office to encourage more client-facing time. On the other hand, technology firms and other creative process-focused companies are seeking to make their workspaces more accommodating. They want to keep employees interacting together in the same environment.
“These type of firms want their people to co-locate, they don’t want them out there,” a distinction that holds important implications for property owners seeking to attract such firms.
Torch Passing to a New Generation of Workers
Corporate Portfolio Analytics’ O’Mara also urged the audience to consider major demographic trends in strategizing how to ensure that future buildings are places people want to work. By 2025, about half of the baby boomers will be out of the workplace, she noted.
The average age of employees at Goldman Sachs headquarters in Manhattan is 32, added King. “Half the people working there are Millenials.”
The next generation values family, relationships and home life more than previous generations. Instead of desiring to own an expensive car or large house, they derive status from experiences and sharing them through social media. They don’t value the big corner office and other corporate status symbols of older generations.
The lesson for companies (and the investors and building owners who want to have them as tenants) is that younger workers prefer to work in a more dynamic, experience-rich environment, such as an urban-type setting offering different entertainment, cultural and transportation options.
With technology supporting an increasingly mobile workforce, “people are not going to want to come in to a workplace unless it is an exciting environment,” said O’Mara. “The ideal situation may be where you go into the office two or three days per week and work remotely the other days, which reduces our carbon footprint by 20% – 40% and has a huge impact on improved quality of life.” It also makes people more productive when they do come into the office, she said.
“The lesson here is, never let anyone over 40 make a real estate decision for your business!” she joked. “They will make the wrong decision. [Younger workers] have a completely different vision of what the workplace should be compared to baby boomers.”
Telework will continue to expand for certain types of jobs, such as customer support, “But I think we will continue to see demand increase for these new types of workspaces,” she added. The key is to avoid the mistakes of the past, such as the early adopters of hoteling space, which eliminated personal work stations and assigned available desks or offices to employees when they came in.
“The problem was that workers didn’t use them,” said O’Mara. “People go to work to see and interact with other people. So just having a place available for them to work doesn’t work. The location and space itself has to appeal to them.”
A Mandate for Change
GSA’s Chief Asset Officer Gavin Bloch spoke about the agency’s mandate to increase teleworking among employees and dramatically increase density across the 370 million square feet occupied by 1.1 million federal employees in approximately 10,000 buildings. He said much of the space was state-of-the-art when it was built 30 years ago, but falls well short of today’s newer expectations.
“As an industry, we’re going to see huge changes in the amount of space per worker in the future,” he remarked. “There is an alignment of stars right now; between shifts in the workforce, ubiquitous Internet access, and mandates to reduce costs and improve efficiency, there is real impetus for change.”
Bloch said GSA is developing prototypes for “professional productive environments” designed to support collaboration, reduce energy use and use real estate more effectively. A typical GSA building uses 22% less energy than a comparable private-sector tenant, he said.
Bloch believes a mobile workforce that performs a large amount of its work remotely is an inevitable trend. “We can’t hold it back. People don’t want to sit in their cars, companies can’t afford for people to sit in their cars, and the planet can’t afford for people to sit in their cars.”
Other panelists agreed mobility will continue to play an increasingly important role as a driver in reducing demand for more space, but also said that different companies will pursue different workplace strategies.
“Salesforce.com is one of the most successful cloud-based computing firms today,” said King. “It’s all about empowering sales people to connect with customers digitally, but it wants its employees in the office at least two days a week, because it’s a new company and it’s still building its culture. Microsoft’s policy to get the best talent wherever they may be around the world. They have no problem with people working remotely, even teleworking from different countries. Google has a very different philosophy. It believes you never can tell when that next spark of genius will occur, that’s why they want you there with your colleagues in the Googleplex, even riding on their buses there and back.”
“It’s clear that businesses are thinking about their physical workspaces much more deliberatively and how they can be used to achieve a competitive advantage,” either through improved efficiency and cost saving, or attracting and retaining talent, said O’Mara.
“There is a lot of product currently out there that is not responsive to how people work, and perhaps isn’t even worth renovating,” she added. “We don’t see a lot of new net demand for space,” which she said are important considerations for long-term investors with big portfolios and mortgages turning over.
One area that is expected to see strong demand as a result of the trends explored during the BOMA Foundation symposium is enhanced value for effective asset managers.
“Cash is king, right now it’s all about the bottom line. Asset management has a much higher profile than when cap rate compression took care of everything,” noted Naman of Lowe Enterprises.
Skilled, knowledgeable asset managers are key to reducing expenses and maintaining tenant satisfaction, she added. “It’s a lot less costly to retain a tenant than to replace one, which is why it’s important to keep these trends in mind when investing and managing buildings.”
