SAN FRANCISCO—There are fundamental changes that are taking place in the office sector to meet the growing demands of the new workforce. Space per worker is on the decline, which has been happening for some time. Individual work areas are less about corporate rank and more about functional use, according to Kroll Bond Rating Agency.

With baby boomers retiring from the workplace and millennials moving in, the shift in workforce demographics has forced corporations to rethink space needs. While the me generation of baby boomers may still crave the corner office, younger workers typically prefer a more flexible work place. To accommodate both generations and work preferences, the hybrid office is becoming the new normal, says KBRA.

Workspaces have become smaller as technological advances and mobile devices reduced the number of workers who require desks. Office workspace declined from 600 square foot per worker in the 1970s to 225 square foot in 2010 and could decline to 150 square foot this year. One exception is law firms which have been signing new leases averaging 873 square foot per attorney compared with 790 square foot on existing leases, GlobeSt.com learns.

According to a survey by the International Facility Management Association, about 70% of US companies have some type of open floor plan. Worldwide, there were 7,800 shared office spaces in 2015. This number is expected to reach 37,000 by 2018. However, these arrangements have not been met with altogether positive reviews.

Approximately 185 million square feet of office space may be considered obsolete and an additional 300 million square feet may not be competitive due to lack of building upgrades. This amounts to about 6% of the total US office stock.

“We expect that office building obsolescence will continue to breed conversions, with activity dictated by local market conditions and zoning regulations,” Larry Kay, senior director of Kroll Bond Rating Agency tells GlobeSt.com.

Although obsolete office space has left the market, employment growth and demand for new higher-quality office space has triggered construction. The development activity has been more pronounced in major gateway markets such as New York City and San Francisco.

According to CoStar, as of March 2017, there is 4.2 million square feet of office space expected to be delivered in 2017 in San Francisco, which is almost double the 2.2 million square feet delivered in 2016. The largest project this year is of course, Salesforce Tower at 1.4 million square feet in the South Financial District.

Even with the reduction in worker space and converted office buildings removed from inventory, the national office stock increased, albeit at a much slower pace following the last recession. According to Costar Group, in the eight-year period from 2001 to 2008, office supply rose by 822 million square feet for an 11.4% increase compared to between 2009 and 2016, when 320 million square feet was added for a 3.9% increase.

Instant Insights /

Office Space Goes from From Me to We

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