Technology Cutting the Need for Office Space - Page 1

Nov 1, 2006

Joe Sciolla

It’s a case of the incredibly shrinking office, and technology is a prime culprit.

Here’s how it works: As technology increases productivity at the workplace, it also leads to a decreasing need for space. Thanks to automation, we need fewer employees, we use less space per employee, and we outsource more jobs overseas.

As a result, with new job growth still limited, Class A and B office vacancy rates in the technology corridor continue to be high—averaging 23% on Boston's Route 128, for example, and 27% on Route 495—and rents continue to be flat or decline.

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Indeed, technology, while it generally boosts efficiency and cuts costs, also compromises the commercial real estate recovery. This is bad news for landlords. At the same time, however, it’s good news for tenants since they have added leverage as they look to renew their leases or relocate in a “flight to quality.”

Fewer Bodies

With computers becoming more sophisticated and more ubiquitous, fewer employees are needed at the office. Today, seven employees can do the work that required ten before the dot-com boom. Moreover, laptops and wireless technology have created an environment in which anyone can work anywhere at any time.

Today’s virtual office can be a home studio, a summer cottage, a car, a plane, or a motel. While this is clearly not the best set-up for everyone, it has proved to be effective for traveling salespersons, consultants, etc. If a dedicated area in the employee’s home allows for telecommuting, corporations will often invest in off-site furniture, phones, faxes, and computers.

Another intriguing arrangement is hoteling, in which companies reserve office space on a “check-in, check-out” basis for employees who are typically on the road. These fully equipped, shared offices are effective in certain situations, but they may not work when workers are involved with team projects or need face-to-face supervision.

Fewer Square Feet

In the last 10 years, we have seen a significant reduction in the average office space per employee. In 1995, it was approximately 300 square feet; in 2000, it was 250 SF to 275 SF; and, today, it is about 225 SF or less.

A continuing trend is to place more employees in workstations rather than private offices. Today, as much as 70-to-90 percent of staff are assigned to workstations, some as small as 36 SF. Almost half of employees today occupy less than 250 SF.

Another trend is the use of collaborative space outside and inside the office. Conference rooms are getting more use, and there’s also greater use of collaborative technology such as videoconferencing, which brings people together at the workplace.

Videoconferencing as well as virtual, online meetings further reduce the need for everyone to work on-site. In the office, wireless technology means less hardware, and flat screen computers and TVs consume less space. And while the paperless office is not quite a reality, less paperwork means less space needed to store these supplies.

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