May 25, 2018

Shrinking Workspaces Dampen Office Recovery

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Shrinking Workspaces Dampen Office Recovery

Employers are occupying about 52 percent of the 142 million square feet of office space that was vacant nationwide during the economic turnaround, according to a new report released this week by Reis Inc., a real estate data firm. In the second quarter, the office vacancy rate remained at 16.8 percent, holding near its post-recession peak of 17.6 percent in 2010.

Why the dismal growth in the office sector as employment picks up? Some analysts say it reflects a larger trend of companies seeking to cut costs by packing more employees into tighter workspaces, as well as urging co-workers to collaborate more.

Case in point: Seyfarth Shaw LLP, a Chicago law firm, recently announced that it was moving from a 300,000-square-foot building into a 195,000-square-foot section of the Willis Tower. The firm told The Wall Street Journal that it is shrinking workspaces and moving some lawyers from private offices to cubicles, but is not planning to cut staff.

"We have an obligation to our clients to reduce our overhead and be more efficient," Peter Miller, a managing partner at Seyfarth, told the Journal.

Though vacancies remain elevated, office rents have increased 7.2 percent since 2010, with the average annual rent at $29.94 per square foot in the second quarter, according to Reis. The San Jose, Calif., area and San Francisco had the largest office rent growth in the nation, increasing 6.4 percent and 5.1 percent, respectively, over the past 12 months, according to Reis.

Source: “Shrinking Office Spaces Slow Recovery,” The Wall Street Journal (July 1, 2014)