Rightsizing May Have Peaked As A Trend

GSA headquarters

WASHINGTON, DC—JLL has an interesting data point for the market to contemplate. In 2015 the percentage of tenants growing their space became larger than the percentage of tenants shrinking their space – 28.5% versus 22.6%. “Although tenants across many industries in Metro DC — such as law firms, contractors and federal agencies — remain in the midst of a protracted rightsizing cycle, over the past 12 months, more lease transactions have involved expansions than contractions,” it said. “Notable growth is occurring across several industries, with tenants such as Capital One, Advisory Board Company and Uber aggressively expanding throughout the region.” As the year continues to play out, we will see if rightsizing can indeed be relegated to the category of past trends. If it has stopped or begun to recede, there will likely be a number of factors why. One, obviously, is growth. Despite the frustratingly slow progress of the recovery  — and more recently, despite the global volatility — the DC market is in a good place right now. Another reason could well be some subtle pushback from employees, tired of being crammed in smaller and smaller workspaces. DTZ’s Director of Research Nathan Edwards has been watching this pushback unfold among federal employees, in particular. Not that it has had much effect. The government is still targeting aggressive space reduction options and prospective leases are still averaging about 20% space reductions, he told GlobeSt.com last year. But here and there, rebellion can be seen. The main example was the National Science Foundation lease. “The initial design for the project was so aggressive in space efficiency that the labor union that represents the NSF employees filed a suit saying it was too aggressive. That prompted a redesign of the space.” There hasn’t been anything as dramatic since, but the suit did draw a line in the sand about how far employees could be pushed on this issue, he said.