Key Findings and Action Steps:
- Office space densification, when over-done, or undertaken by a firm in an industry ill-suited to an open floor plan, can lead to a decline in employee productivity.
- On the other hand, attributes of trophy office space — such as a prime location, access to top-notch amenities, LEED certification, and appealing common areas — can lead to an increase in employee productivity. Under these circumstances, the added occupancy cost of upgrading to best-in-class office space may be recouped in the form of increased productivity.
- In six out of ten major metropolitan areas, including Atlanta, Chicago and Los Angeles, a mere 1% decline in productivity would wipe out the cost savings achieved from over-densifying office space. In the remaining four major metropolitan areas, a 2% decline in productivity would offset those savings.
- In eight out of ten major metropolitan areas, a 3% productivity gain achieved by occupying efficient trophy office space would recoup the added cost of upgrading to such space.
- Implications for tenants: While reducing the square footage occupied per worker appears to be a simple way to cut costs, it is important to be aware of its potential negative impact on productivity. Just a 2% decline in productivity can wipe out a tenant’s cost savings, so tenants need to consider carefully whether sharp reductions in space are in the company’s best long-term interests.
- Implications for best-in-class owners: Often it is difficult to move space priced at the top of the market. However, the associated productivity gains for a potential tenant may be enough to more than recoup the added costs. Selecting an appropriate office location and layout is a major business decision with many factors and variables to be considered. The impact on productivity is an important factor to be highlighted