The Death of Densification?
Office size had gotten smaller but more populated. Thankfully, this looks like it's ending.
For the past decade, tenants have been moving their employees into less and less office space in the name of decreased cost and greater collaboration.
Commonly referred to as densification, this trend may be, thankfully, coming to an end.
At the Durst Organization, we closely monitor the latest trends in the work environment. What we have found is that densification has produced some desirable efficiencies for tenants, including reducing the oversized, ego-driven executive offices of the past and, in some circumstances, increasing collaboration and reducing costs.
But the densification trend is beginning to fall out of favor. Instead, many companies are now designing their space with the goal of making their workforce more productive and satisfied. And this is a good thing.
Densification has been widely embraced as a real estate cost-saving measure—a phenomenon that contrasts with the residential market where the average new single-family home has increased in size by 147 percent since the 1950s despite the average American household getting smaller. The Great Recession of 2008 was an accelerant for densification. Private offices were replaced with open layouts. And where private offices remain, they have shrunk significantly in size. In the last few years alone, the useable square feet (USF) per workplace seat has been reduced from approximately 200 USF to 142 USF.
However, a new consensus is emerging that the tempting “pack ‘em in” approach is problematic. The promise of lowering real estate expenses by squeezing more people into less space does not take into account the complexity of human psychology and behavior. Concern for employee morale, absenteeism and lower productivity has caused many employers to increase amenity and quiet spaces, offsetting the economic efficiency gains of smaller employee workspaces.
Empirical data also indicates that densification produces some unintended and undesirable results. A number of studies, including those published in the Journal of Environmental Psychology, demonstrate that the increased noise level and decreased privacy typically resulting from open-plan office configurations are reducing overall productivity and employee wellbeing.
Landlords, brokers, architects and designers should proactively share these findings with companies undertaking space planning. Unfortunately, too many executives continue to overstate the benefits of densification. A senior executive of a large bank recently shared with me that his headquarters makes space planning decisions based on a formula that allocates a certain square footage per employee. I was surprised to learn that this formula varied by region and was dictated by “market conditions,” rather than correlating design and square footage per employee with effectiveness and productivity.
Some brokers also continue to promise real estate cost-savings through densification as a quicker means to secure business, rather than educating their clients about how important intelligent office space design is to success.
A decade ago, telecommuting was all the rage. Some even predicted that office space would become obsolete. In fact, today people are coming to the office more frequently than in the past. We now all understand that a company’s success is often driven by the creative spark between colleagues that only happens in the office. Like telecommuting, densification may be a trend that fizzles.
This is all good news for New York City landlords—and the employees of our tenants. Densification is often a penny-wise, pound-foolish approach to space planning. Ultimately, human capital is best thought of as an investment rather than an expense. If an effective workforce is the objective, well-designed roomier space is a far more important priority than saving a few dollars in real estate expenses. Let’s ensure all leasing decision-makers know the facts and take more office space. It’s good for their health. And ours as well.
David Neil is a principal at the Durst Organization.