Report: Shrinking office space has big impact on city planning

Few industries ride the boom and bust of the American economy as closely as the commercial real estate sector, which can be both a bellwether of success or one of the first to be bludgeoned by a downfall. By nature, it’s a cyclical business. But according to research by REIS, analyzed by City Observatory, while many areas continue to build high-rises and new office space, the square footage per employee has shrunk dramatically during the recent economic upswing. And that smaller footprint has big implications for development and planning.

Based on analysis of data beginning in 1999, the REIS report shows that during recovery periods, businesses start slow and then ramp up their expansion plans, acquiring or leasing more space and increasing the amount of square feet per employee. But, when the researchers averaged the amount of space per worker across each boom, they saw square-foot-per-employee take a steep dive over time. During the late 2000s, each additional work resulted in about 125 square feet of space. Over the last decade, that allocation had fallen to just 50 square feet per new employee.

What’s the big deal? After all, with the advent of working from home, coworking, teleconferencing, and more travel, modern workers aren’t surprised to hear their companies are becoming better at using space. But the impact goes beyond corporate office management and infuences city planning.

REIS concludes the trend towards less space is a permanent adjustment to new economic realities, which City Observatory believes has a massive impact on how we should think about economic development. Most planning documents assume as the economy grows, we’ll need more office space, and encourages expanded development (with fixed or expanded space for every new worker). This study suggests the opposite is true; as companies literally become leaner, and need less room to operate, cities should focus on filling in the already available space and thinking more about innovation hubs and ways to concentrate new industries.

Our cities can handle denser development, while companies can spend less on commercial space, and more on employee salaries and benefits. A little more space to stretch out may not mean a lot on an individual basis but multiplied by an entire commercial district, it can make a big financial difference.