Perspectives

Changes in Average Square Feet per Worker

File Type: Free Content, Article
Release Date: September 2012
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Senior businessman discussing project with staff

At the 2012 National Research Directors meeting on September 20, hosted by the NAIOP Research Foundation, participants from major commercial real estate brokerage firms, as well as data providers, pondered the average square foot per employee metric and the increasing need to incorporate collaborative work areas into office space planning.  All agreed that a balance of amenity-rich space where employees can interact, and “heads down” space where employees can individually focus is ideal, but what is the space allocation per worker? 

According to the CoreNet Global Corporate Real Estate 2020 survey of 500 corporate real estate executives, the metric has changed from 225 square feet in 2010 to 176 sf in 2012, and is projected to reach 151 in 2017, with 40 percent of survey respondents indicating they would go below 100 by this period.  

The national research directors also discussed current economic conditions, property sector fundamentals and trends impacting the industry.  Some of their insights include:

Office

Steve Coutts, senior vice president, National Research, Studley

  • Job growth used to be robust among the FIRE industries, but now the ICEE (intellectual, capital, education, energy) sectors are generating demand for office space.

Bob Bach, national director, Newmark Grubb Knight Frank

  • Looking at the labor market recovery rate from peak to trough, we have recovered 46 percent of the eight million jobs lost during the recession. Pittsburgh is doing very well due to the concentration of medical, educational and financial clusters as well as energy (Marcellus Shale).

Ross Moore, director of research, CBRE, Canada

  • Two REITs came together to purchase a $1.3 billion office tower in Toronto, a massive transaction by Canadian standards.   The number of REITs in Canada has tripled in size, going from seven to 30 in the last three years.  Canadian Pension funds are coming to the United States to purchase assets.  Some are partnering with shopping center developers to purchase retail.

Industrial

Aaron Ahlburn, senior vice president, Americas, Jones Lang LaSalle

  • There is a push to achieve clear heights of 36 feet in warehouse/distribution centers and dedicated fulfillment centers due to e-commerce.  Supply chain efficiencies need to be built into the new fulfillment centers.
  • There is more export traffic out of the West Coast ports due to agricultural goods packaged for shipment to China from the United States, especially wheat and pork.
  • Movement among owners is as follows: Blackstone is a new player in industrial; Kilroy is selling; Weingarten is exiting to refocus; and ProLogis is pairing back their tertiary holdings.

Retail

Garrick Brown, director, National Retail Research, Cassidy Turley-Terranomics

  • Mom-and-Pop retail is gone until housing recovers in the next five years.
  • Franchises are coming back, lowering their barriers to entry.
  • Sears is struggling and will likely go down.  They currently hold $700 million in debt and will not be able to repay it.  There’s a 50 percent chance they will file for either Chapter 7 (liquidation) or Chapter 11 (protection from creditors for reorganization).

Multifamily

John Chang, vice president, Research Services, Marcus & Millichap

  • As of 2Q12, there are 27 markets with vacancies below pre-recession levels, Portland being the lowest.

David Porter, vice president, Multifamily Research, CoStar

  • Houston is experiencing what is termed “The Katrina Effect” – residents of New Orleans given housing vouchers won’t vacate the apartments so the locals are moving out.

Foreign Investment

Ray Wong, director, Americas Research Operations, CBRE, Canada

  • There is a lot more investment demand in Brazil, mainly on the retail side, but also residential and office.  Brazil offers good future growth potential for the next five- to-10 years and a higher cap rate compared to the U.S. market. 

Joe Mannina, chief operating officer, Real Capital Analytics

  • South Florida is a safe haven for Latin American investors, also New York on the retail side.
  • Private investors, which tend to be entrepreneurial and market-leading, have been more active.  The percentage of transaction volume being purchased by private investors is increasing by 20 percent.