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In Focus: Unintended Consequences of the Open-Office Model

Q2 2016
There is little doubt that open-space workplaces are not only here to stay, but will earn new corporate recruits in the years ahead. According to the International Facility Management Association, about 70 percent of U.S. offices have moved to this model. The benefits are many: more efficient use of space, less vacancy, easier collaboration with colleagues, access to natural light for more people, and an aesthetic that sought-after millennial talent has embraced — and cost savings, of course.

So What’s Not To Love?
I believe in the future of open-concept workplaces, but as with any disruptive change, there are unintended consequences that emerge as adoption spreads. Not all are necessarily negative, but they are worth studying to mitigate any downside in the future as more companies move in this direction.
KC Conway, senior vice president for credit risk management, is responsible for market intelligence at SunTrust Commercial Real Estate and oversees real estate valuation for SunTrust Bank. Conway is a nationally recognized speaker on a wide range of commercial real estate topics, from appraisals and bank regulation to ports and securitization.
  • Common areas are becoming the workstation of choice: Private work areas are arguably the fulcrums of the open-office concept because they address the concern that some work requires more intense focus. While the experts behind office redesigns ostensibly create enough of these work areas to accommodate demand, my experience suggests that even more are needed. In practice, people have been effectively freed to identify the work environment that is best for them. Visit the coffee shop at a modern office building during the workday and you will see what ?I mean; finding a seat is a challenge.
  • Peak parking demand can outstrip supply: Parking challenges often emerge during peak office hours as companies add more employees per square foot. Even if an employee is on the road or working from home four out of five weekdays, at some point he or she will be in the office — and often at the same time as everybody else. Office buildings constructed decades ago typically had an employee-to-office space ratio of one employee per 300 square feet; now many are in the range of one per 160 to 180 square feet. It is hard to avoid escalating this ratio without straining the underlying infrastructure — including parking.
  • Older buildings prove difficult to upgrade: As the demand for open, more efficient workspaces increases, re-tooling older buildings to keep up with the layout and technology needs of today’s businesses is proving to be difficult and, in some instances, nearly impossible. Surprisingly, this is true of purported Class A office space in high-rent areas, as well as buildings in less desirable locations. Demolishing walls and performing upgrades to accommodate common areas, interior offices, and new technology infrastructure is expensive. It is especially hard to make the math work for buildings designed for traditional offices. As more companies move toward an open-concept workplace, they are naturally gravitating toward buildings where this type of renovation is cost-effective.
There may be many benefits of the open-office model, but that shouldn’t prevent companies from fine-tuning the concept in the years ahead. Commercial real estate developers, in particular, should take note and assess what the next iteration of this trend will be. As more companies take a step back to assess how it is working, scrutiny is guaranteed. Developers have an opportunity to help lead that conversation.
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