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5 Key Trends Influencing Office Space Demands
Today's modern workplace is a far cry from the traditional cubicle-filled office. Now, employees are more inclined to work remotely or near their homes, and they prefer an open, creative environment. Increasingly, they are less likely to drive downtown to their nine-to-five desk job as they once were.
Overall, broader positive economic trends leading to more businesses generating employment are creating a healthy office real estate market. The U.S. Bureau of Labor Statistics expects the unemployment rate to fall to 2.5 percent this year, with 20.5 million jobs created by 2020. As a result, demand for office space is rising.
For commercial real estate developers, keeping up with the latest changes in office trends is crucial to competing in this booming industry. The key to meeting current development demands is understanding the several economic and demographic factors driving these new workplace needs. After all, as workers' priorities evolve, they can offer developers new and lucrative opportunities.
Here are five key office trends influencing today's commercial real estate projects:
1. The Rise of the Shared Working Environment
A growing number of employees are working remotely, preferring the flexibility and independence of managing their own schedule and the freedom to work where they choose. In 2016, 43 percent of employees worked away from their managers and coworkers, up from 39 percent in 2012, according to a Gallup survey. They often work in shared office space near their home with other remote workers, instead of in their company's office.
Of course, in today's tight labor market, employers want to cater to employee demands so they can attract and keep top talent. For developers, that means moving away from projects with the traditional layout of private offices and cubicles and toward a shared working environment fit for the growing ranks of remote workers.
“It's no longer just about solving for space," said Liz Burow of WeWork, which provides coworking facilities. “It's about attracting and retaining talent among an increasingly liquid and digital workforce. We want people to make a life, not just a living."
Commercial real estate developers should be aware that the rise of the shared working environment creates a need for smaller office spaces. Today, thanks to telecommuting and coworking trends, the average office accommodates about 150 square feet per employee, down from 225 square feet in 2010, according to the Mortgage Bankers Association.
2. Technology Sector Driving Demand for Creative Workspaces
The growing technology industry, particularly in cities like San Francisco and New York, is also having a significant impact on office space design. And many companies in technology and other sectors in cities like Boston and Chicago are following the model set by these firms.
As employers vie to attract talent, they are offering more creative work spaces geared toward a digital workforce. Increasingly, tenants are ranking employee satisfaction above low cost as their main concerns, says CBRE's Kasey Garcia. And what employees themselves are prioritizing now, she says, is flexibility, well-being and workplace culture.
In fact, major technology firms like Apple, Google and IBM are finding that a more collaborative workplace is good for the bottom line. For example, Amazon's latest addition to its Seattle headquarters provides a rainforest-like environment for meetings to trigger creativity and communication. One study conducted by psychologist Susan Pinker found that workers are 20 percent more productive when they are in an environment where they socialize.
Commercial real estate developers should design office space projects with social features in mind, such as cafes, courtyards, open floor plans and lounges that allow employees to engage.
3. Millennials and Gen Z Have Different Needs Than Past Generations
The rise of millennials in the workforce and the entry of its successor generation, Gen Z, are leading to dramatic changes for office developers. Millennials are starting to raise families, so they are seeking even more flexibility and work/life balance, and Gen Z is likely to follow suit.
Millennials are expected to comprise 50 percent of the workforce by 2020, according to PriceWaterhouseCoopers. Unlike employees with typical nine-to-five schedules, millennials tend to spread out their workday from about 7 a.m. to 10 p.m., with other activities, like going to the gym or grocery shopping, included in the day.
As millennials take top positions at work, and Gen Z is becoming a larger presence, their ranks are driving the trends in open spaces and coworking environments that have more employees per square foot. Developers adapting to these trends should address how a building can support the higher density.
Office spaces geared for coworking often require developers to invest more heavily in building them out. For example, restrooms and elevators may need to accommodate more people. Developers can also expect to see more tenants with shorter-term leases amid this office trend.
4. The Suburbs Offer Growth Opportunity
With rates rising in downtown areas, and older millennials increasingly preferring the suburbs to live and work, this market is ripe for a resurgence.
The demand for suburban office space is growing as more millennial families relocate from urban areas to communities but still want shorter commutes they are used to. For these employees, the convenience of working near where they live is invaluable.
"Over the next five years, the majority of millennials will start to move into that age where they're getting married and starting families and that will be a key driver," John Chang, Marcus & Millichap First Vice President of Research Services, said. "When they do that, these suburban locations with amenities are going to be favored."
To take advantage of this office trend, commercial real estate developers can target mixed-use communities with housing, retail and office space rolled into one project. With that in mind, developers can focus on more neighborhood-like areas for office space.
5. Environmentally-Friendly Design Remains in the Foreground
The role of environmentally-friendly features, including LEED certified buildings, has been growing in the past decade.
While this office space trend is taking a back seat to trends such as shared and smaller spaces, LEED buildings are still in demand. Thanks to increasing regulations requiring newly developed buildings to have minimal environmental impact, commercial real estate developers can continue to plan green features in their office projects.
Lately, according to the U.S. Green Building Council, the more popular green building trends include energy-saving features like retrofitted lighting and solar panels, and water conservation features like systems that reclaim and replace water at the building.
The Bottom Line
Today's market for office space is thriving, but it is also significantly changing in several ways. Commercial real estate developers who are aware of and focus on these trends influencing the demand of their future office developments, including offering more engaging features and collaborative workspaces, can find new opportunities and succeed in today's market.
Important Legal Disclosures & Information
 https://www.forbes.com/sites/danschawbel/2017/11/01/10-workplace-trends-youll-see-in- 2018/#1e48fbbc4bf2
 https://www.fastcompany.com/3036935/why-you-need-to-actually-talk-to-your-coworkers- face-to-face
 https://www.hfflp.com/blog/2016/july/co-working-what-does-it-mean-for-the-commercial- real-estate-landlord.html
 https://www.forbes.com/sites/bisnow/2017/10/13/why-this-year-could-be-a-turning-point-for- suburban-office/#7d598d876622
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