The Incredible Shrinking Worker’s Office

At a time when the office sector faces a lot of pressure from hybrid work and less corporate need for real estate, a calculation property owners and operators might pay attention to is how much space companies devote per capita worker. The more uncomfortable conditions become, the less one might think workers would want to spend time in the office.

Justin Fox, author of The Myth of the Rational Market, wrote an analysis in Bloomberg on densification, or the reduction of the amount of office space given U.S. workers.

“Saving money was one driver, as was a belief among some employers that denser layouts encouraged interaction and innovation,” he wrote. “But the best predictor of densification was ‘market-level job growth and the availability of space (or lack thereof),’ commercial real estate brokerage Cushman & Wakefield concluded in a 2018 analysis of the phenomenon.”

But with the amount of office space that has opened since the Covid-19 pandemic started, it would seem at least possible that, with more space found, more might be made available to workers while negotiating cost-saving deals with owners to reduce rents.

Fox writes that “after an upward spike in square feet per worker in 2020, the densification appears to be accelerating.”

There are some significant caveats in the data (which, to be fair, isn’t something an individual can easily order up in a way to avoid potential problems):

1. The office-using workers are a count of jobs in information management, financial activities, and professional and business services. That isn’t a statistically valid sample. It depends on jobs that can often be remotely with greater ease than other jobs. 2. The federal government’s Current Population Survey asks the questions of whether people worked remotely and, if so, how much of their work was done in that fashion. But that is a broadly administered survey going far beyond office workers and may not adequately cover people working in all offices. 3. Amounts of office space in use seems to come from Cushman & Wakefield data, but that would be an estimate of office vacancies, not actual occupancy rates. Further, that assumes the firm had data that systematically covers all office buildings. It may not match up to the government data on working from home. 4. The actual data on space per worker comes from a CoStar analysis, which may not match up with any of the above data.

Fox also mentions other factors, such as higher levels of vacant space being in older buildings where companies aren’t focusing their real estate usage; offices may be underutilized doing some parts of the week but not on others; and there may be no employer downside to increasing densification.

The concept of the data is interesting, but there are enough questions to wonder whether any of the information is adequate for making decisions. Property owners might take the idea and run surveys among their own occupiers for a more coherent result.