results-based tenant

Shrinking workplace space requirements

Landlords pushed to meet demand for agile space
Monday, January 27, 2014
By Barbara Carss

Green goals can align with cost efficiencies when it comes to the allocation of office space per worker. The Canadian government’s sustainability strategy for 2013–2016 includes a pledge to increase occupancy densities within its real estate holdings as part of its commitment to implement environmental best practices in government operations. It is also in sync with the shrinking of workplace space requirements in the private sector.

“It’s growth without growth,” said George Della Rocca, senior director of global real estate operations with the Royal Bank of Canada. Speaking to attendees at last December’s Toronto Real Estate Forum, he said that this meant many corporate employers are looking for flexibility to accommodate an expanding workforce, while curbing the once reflexive expansion of accommodations.

Seminar panellists examined a confluence of design, technological and socioeconomic factors that are shaping today’s workplace and influencing landlords’ competitiveness and returns. Steadily declining ratios of space-to-worker — the onetime standard of 260 square feet per employee has now dropped to about 160 square feet — come with corresponding pressures on employers to entice and retain a skilled workforce and maximize productivity.

“Creating a workplace on the old paradigm of just a desk and meeting room is wrong,” asserted Earle Arney, managing director with FKA Architecture and Interiors. “It’s all about knowledge workers — removing boundaries, empowering employees and celebrating collaboration.”

The federal government’s target of 140 square feet per employee is still more spacious than some emerging private sector examples of 120 to 100 square feet. Industry insiders maintain that shared space options, in which employees do not have assigned workstations, make an 80- to 100-square-foot target viable.

“Agility is the new buzzword,” observed Sheila Botting, senior practice partner with Deloitte Real Estate. “Agility is the opportunity to change.”

Such change is supported by the so-called “bums in seats studies” that have shown a significant proportion of workstations are vacant at any given time. Alternatively, a free-range approach designates areas for differing tasks rather than tying each employee to a specific desk. This allows for a more accurate prorating of desks to employees on-site rather than providing for the largely theoretical full house scenario.

Notably for Della Rocca, it is more than a corporate mandate that he is advancing for his employer. It is also a reality of his own workplace that he embraces as an employee.

“You can choose the space where you work. You can choose the way to work in the space,” he said.

As is often the case, however, age tends to hamper agility. Physical encumbrances, such as the number of washrooms per floor or the width of the stairwell, place regulatory constraints on the number of occupants a building can accommodate.

“The new buildings have obviously been engineered around it (higher densities),” noted Sandy McNair, president of Altus InSite. “The bigger challenge is what can we do with 500 million square feet of existing stock?”

Evolving workplace tools underpin the escalating plug loads that now account for as much as 50 per cent of total energy consumption in some office buildings with efficient, high-performance HVAC and lighting. Projections for widespread growth of wireless technology — with an estimated 50 billion devices connected and communicating by 2020 — will only propel this trend.

“We are getting ready for this explosion of connection. (Even) the toilet could become IP enabled,” quipped Bill MacGowan, director of smart and connected real estate with Cisco Canada. “Right now we are each packing about 1.9 devices, and that will expand to four. We are really entering a new phase of how we work and collaborate and communicate.”

As employees gain heightened ability to work anywhere at any time, they will be less reliant on resources in a physical office. Digital storage should also significantly reduce many corporate tenants’ space requirements — a trend that Arney confirms is already occurring in office design. On the social front, MacGowan suggests that a culture currently struggling with “work-life balance” may be evolving to a “work-life blend.”

“With these new tools, you are also going to have to decide from a personal point of view: how are you going to use them?” he said.

Economics likewise influences cultural shifts around office configuration and space ratios. For example, Arney noted that the financial crisis of 2008 pushed many law firms to adjust long held attitudes and downsize their office space.

“The marketplace was the enabler of change management,” he said.

In contrast, companies operating in more robust economies or in markets with lower rents tend to cling more to the status quo.

“Calgary is a lot more generous with space,” McNair reported, predicting that it will be some time before the space-per-occupant standard drops below 150 square feet in that city.

Nor, he cautioned, do tenants have unified expectations and demands.

“The marketplace consists of many different segments and the occupant community is quite different,” McNair said. “The notion that you should provide exactly the same services to everyone in the building for exactly the same price is pretty much outdated.”

Barbara Carss is the editor-in-chief of Canadian Property Management.

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