The Digital Revolution Impact On Real Estate

We have all been hearing about Twitter, Facebook, Fliker and many other forms of digital communication and how younger people are spending their time online, on mobile devices, and changing the social patterns. What you do not hear about much is the massive impact all of this is starting to have on real estate and the speed at which it is suddenly happening. Office space requirements are changing at many companies, law firms, banks and other places. Private offices are quickly becoming obsolete in many companies. Open spaces and less space per employee is now becoming the rule. One major law firm has now set 210 sq ft as the space allotted to any person-including partners. If a partner takes more space it is deducted from the available to others, so partners are getting smaller offices. The law library is gone. Paper storage is almost gone. The big secretarial pool is gone. The media, ad agencies, and similar companies are knocking down offices and making cubicles and open spaces. Some companies have departments where two people share a cubicle with one in the office two days and the other two or three. With I pads, I phones, blackberrys and the like, many young people work from all sorts of alternative locations. Just multiply this times all the major companies, and the office space required in the future will shrink materially. Lease terms will require very different TI and shorter term so the tenant can change as its needs reduce. Young staff-under 35- think it fine to be working from out of the office. Teenagers spend huge amounts of time online in one way or another.

Recruiting for law firms and other kinds of companies has changed dramatically lately with the firms having to offer very different work environments. Talk to young executives and they talk about the environment more than anything. In retail the way stores accommodate online shopping in the future, how stores are laid out, how brands promote themselves, is all changing rapidly. While brick stores are not going away, the demand for additional retail space is likely to be curtailed as more and more shopping is online. It is becoming common for a physical store to be the showroom, and then the customer goes home and executes the purchase online. Some firms now give a new employee $3,000 on their first day to go buy their own computer, but out of the $3,000 the employee must pay to maintain it himself. The firm only provides the servers and printing, not maintenance.