Office Squeeze-Play

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Posted on October 2, 2017
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Office Squeeze-Play

By Adam Palmer, CCIM

2017 has started off well for Southwest Florida, especially as it relates to the job growth that it has been reporting.

Charlotte County led all of Florida in year-over-year employment growth (12.5%), while their two-doors-down neighbor, Collier County, garnered second (11.4%).

Meanwhile, Lee County was #1 in the state for Education & Healthcare job growth (7.2%), and second in the State for the job growth it experienced in financial services (5.5%).

Have these accolades translated into absorption of more office space? The answer is yes, but maybe not as much as one would have hoped.

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The “squeeze-play” hasn’t been reflected much in the averages… yet.

End Quotes

Office vacancy is hovering around 10% in the same Tri-County area after a year that witnessed Lee County absorb nearly 20% of its existing vacancy in many submarkets. Orlando leads the nation’s large-MSA’s in job growth, adding more than 1,000 jobs per day. Yet, the net-absorption remained relatively flat year-over-year.

One hindrance that has kept the phenomenal job growth from driving vacancy totals down even further has been the steady decline in space dedicated per employee. The employers’ desire to squeeze more into less has been a continuing trend across the state and country.

The “squeeze-play” hasn’t been reflected much in the averages… yet.

Case-in-Point: If you Google ‘square feet per employee,’ it will state the average across the country is 151± square feet (The Mehigan Company). Average? Sure. After all, there is still a lot of functional obsolescence out there. New deals, however, seem to average much less.

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Our current space-per-employee number likely remains higher than many other comparably-sized companies.

– Tampa’s Peter Barnett, CCIM, PricewaterhouseCoopers

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Tampa’s Peter Barnett, CCIM, Director of Real Estate, leases millions of office square footage across the U.S. for PricewaterhouseCoopers. “I can tell you that the trend is clear,” attests Barnett. “In fact, we have seen a 35% reduction in this metric over the past five years, however, I would suggest that our current space-per-employee number likely remains higher than many other comparably-sized companies.”

Peter may be right. In fact, an ongoing search on behalf of another Fortune-Fiver has this particular company considering a space below 100 square feet per employee. Many in the industry argue this number is trending downward due to the desire for more open space-plans, ones that are more conducive for collaboration amongst coworkers.

Even so, the same trend has been visibly noted in professions that are not exactly seeking innovative collaboration from their staff. Joe Gammons, a leading Steelcase office furniture sales representative, is seeing it in most spaces. “When I started in this business 14 years ago, 8-by-8 cubes were the norm. Now, the norm seems to be 6-by-6. But more and more prospects are requesting the 5-by-5’s.” Gammons continued, “These aren’t call centers that we are talking about either, these are professional office types, many of whom used to have a private office. The call centers are whole-nother story… they’re packing them into 42-inch workstations now.”

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When I started in this business 14 years ago, 8-by-8 cubes were the norm. Now, the norm seems to be 6-by-6. But more and more prospects are requesting the 5-by-5’s.

– Joe Gammons, Steelcase

End Quotes

The trending reduction of space averages could very likely continue as we head into a day and age where futurists predict more people will work remotely from home, while employers design spaces for staff to only periodically “plug-in” on-site. If the square footage per employee drops 30% across the board, will there be enough people and jobs to fill the vacancies? I believe so.

Florida consistently ranks at or near the top in population growth. Census projections have the state’s population totals increasing by 20%± from 2015 to 2025. Other projections have the Orlando-Tampa mega-region nearly doubling in population over the next 30 years.

Florida should have the demand for jobs and, with this, the demand to build new, smaller spaces for everyone.

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