More than anything else, office tenants want to attract and retain the right talent and are willing to pay a rent premium for office space attractive to younger workers.
The open office concept has been touted as the answer, with claims that it provides collaborative, amenity-rich workspaces that young workers prefer. But studies indicate that open office space:
- Reduces face-to-face interactions, productivity and work quality;
- Causes workers to wear noise-cancelling earphones;
- Induces high stress levels and high blood pressure; and
- Increases sick days and employee turnover.
“The best companies are not moving completely to open space, but are customizing offices with a mix of spaces, creating a hybrid solution that fits individual work styles and company culture,” says Christian Beaudoin, managing director of research and strategy with real estate services firm JLL.
Open office space reduces square footage required per employee compared to traditional office space. According to real estate services firm Cushman & Wakefield, on a national level, the amount of office space allotted each employee declined by an average of 8.3 percent between 2007 and 2017, to 193.8 sq. ft. To make up for lost personal space, office tenants and landlords are investing significant capital in tenant improvements (TIs) to create a variety of workspace options and shared amenities important to young professionals, including fitness facilities and health spas.
Part of this may be due to the specific issues created by open office space environments. According to a CBRE report “Top 6 Challenges and Solutions for a New Office Fit Out,” these offices tend to lead to higher ambient noise levels, higher vibration from the slab within the buildings’ steel frame structures (because of the absence of wall partitions and suspended ceilings), heating and cooling issues as occupants in large open spaces have different temperature comfort levels, and higher construction costs because the minimalist open floor office aesthetic can actually require more labor and high-quality materials to build out. Building owners then have to spend time and money to deal with these and other drawbacks.
Office TIs allowances jumped by more than 10 percent in 2017, by 13 percent in 2018 and are expected to increase by 12 percent in 2019 over the previous year, with the average U.S. office build-out costing more than $196 per sq. ft., according to JLL’s U.S. and Canada Fit Out Guide.
Beaudoin notes that tenants and landlords are sharing the cost of build-outs, with the length of the lease term correlating with the share of TIs the landlord is willing to provide.
Beaudoin also notes a trend of employers “treating adults like adults” by offering workers the flexibility to work when and wherever it is appropriate for their individual work style and type of work performed, including working from home or other locations off-site. But even employers with robust mobility programs usually require some office time, according to Coldoff.