The Incredible Shrinking Office

The advancement of computer and telecommunications technology has been the catalyst for the rapid evolution of the office environment. As many companies go through the re-engineering process, the reduction of office space helps to improve the bottom line. Even companies on sound financial footing include increased efficiency of office-space utilization in their business plans.

This trend becomes more apparent when examining office statistics published by the Building Owners and Managers Association. From 1990 to 1994, the average office size decreased by 9.8 percent from 10,233 sf to 9,217 sf.

A company can decrease the amount of office space that it needs through more-efficient office layout and telecommuting. Many companies use elements of both strategies. Three techniques that reduce office space through greater efficiency are technological improvements, reduced common areas, and smaller work areas.

Technological improvements primarily involve substituting electronic storage for paper storage. Space-eating libraries and filing cabinets can be replaced by electronic retrieval systems such as CDs and high-capacity hard drives.

Reducing common areas often means the size of lobbies, conference rooms, and utility rooms is decreased. Because the utilization of large conference rooms is low, many companies have opted for small discussion rooms that are designed to meet the needs of teams or small work groups.

Finally, modular workstations require less space and are more efficiently configured than hard-wall offices. When the needs of companies change, modular workstations can be easily reconfigured into new floor plans. In addition, tenant-owned modular workstations can move with the tenant, greatly reducing future build-out costs.

These three techniques can reduce office space requirements between 5 percent and 25 percent without reducing the number of employees that can be accommodated. However, the actual space savings fluctuates widely from company to company because of differing abilities to implement these techniques.

Decreasing office space requires trade-offs. For example, converting libraries and files into an electronic format may require a major investment in employee time and computer hardware. In some instances, this high cost may not offset the savings of rental payments. Companies that require a high level of confidential client interaction might be poor candidates for modular offices because client confidentiality could be compromised. In addition to performing a financial analysis on reducing office space, companies should carefully examine how the reduction will impact their operations.

The second strategy for reducing office space is the utilization of telecommuting. Telecommuting involves providing employees with the tools to work effectively outside the office at least part-time. Telecommuters are connected to the office by a variety of means that can include e-mail, cellular phones, pagers, and fax machines. Accounting, law, and consulting firms are on the leading edge of the telecommuting trend. In addition, companies with large sales forces such as pharmaceutical and computer companies often utilize telecommuting. Companies that require employees to spend a great deal of time with clients are ideal candidates for telecommuting.

However, telecommuting has its drawbacks. Some employees become less productive when working at home because of the absence of a structured atmosphere or the loss of social interaction with their coworkers. The additional cost of providing employees with computers, fax machines, cellular phones, and additional telephone lines should be taken into consideration when offering workers the option of telecommuting. Finally, workers who only telecommute part-time must still have some space at the company's office. Despite these drawbacks, telecommuting has the potential to significantly reduce the amount of office space for some companies.

A new lexicon has developed for alternative office space configurations that are geared toward telecommuters. The following list of these terms was assembled by the National Association of Industrial and Office Properties:

  • cockpit office, a small workspace of about 50 sf that has full-height walls for privacy;
  • personal harbors, cockpit-like workstations that include a workspace, small storage area, and a sliding door;
  • phone booths, small workstations along a wall that are utilized between meetings;
  • touchdown workstations, informal, nontraditional, open work areas, such as kitchens or lounges, that are utilized by more than one person on a first-come, first-served basis;
  • sharing, when more than one person uses an office workstation on the assumption that only one user is there at any given time;
  • freestanding or just-in-time, the sharing of an office or workstation on a first-come, first-served basis;
  • telecommuting center, collective workstations set up by a group of companies for use by telecommuting employees near their homes.
  • hoteling, employees call in advance to reserve an office that is assigned on a temporary basis;
  • moteling, employees check in upon arrival and are assigned work spaces without advance "reservations."

Before space-planning decisions are implemented, each company should carefully examine the impact on the operational environment that increased space efficiency or telecommuting will have. Clearly, the bottom line of many companies can be improved through reduction of office space. However, telecommuting and increased office-space utilization should not be viewed as a panacea for improving the performance of every company. The drawbacks of each strategy should be examined carefully to discover if the anticipated savings will be realized.

George Green

George Green is a policy representative/senior economist for investment real estate at the National Association of Realtors in Washington, D.C.