Why the Office Market is Recovering Slowly

I recently participated in a commercial real estate symposium where I was a panelist.  My topic was the state of the office market in Metropolitan Baltimore.  I was the last presenter so I had plenty of time to absorb the preceeding presentations. 

 

The one that caught my attention, unexpectedly, was entitled “Government Leasing Trends,” presented by a member of the team that provides real estate brokerage services to the State of Maryland.  Initially, I thought, how exciting can this topic be?  But, I was very surprised.  First I learned the state is driving the commercial markets with adoption of green building technology, which keeps occupancy costs low.  Next, I learned the state’s office space standard had decreased from 125 usable square feet (“usf”) per person to 75 usf.  A usable square foot is generally defined as one square foot of office floor space that can be occupied by a person, a desk, a file cabinet, etc.  The state’s new standard equates to floor space approximately the size of a rectangle drawn on the floor with dimensions of 10 feet x 7.5 feet.

 

I soon drifted off into deep thought pondering how my office space needs had changed over the ten years I have been in business.  I have moved twice.  First, I departed the central business district for Charles Village, a neighborhood just north of mid-town.  Paid parking in the former, free parking in the latter.  Second, I moved within my building, downsizing from an 855 usf suite featuring a reception area, two large private offices and a large conference room, to a 457 usf suite with a file room and one large open area for two desks and a conference table.

 

I have also changed the way I work.  Today, I usually insist on meeting my clients in their offices.  Their office space, after all, is the main topic.  By visiting my clients, I can better understand exterior factors:  the quality and image of the building, traffic patterns, visibility, pedestrian access, parking, signage and neighborhood texture.  Inside the building and their space, I can better understand how they use office space:  cubicles, private offices, teaming areas, conference rooms, technology and storage.  I can also assess the quality of the work environment:  natural light, fresh air, “flow” of the floor plan, ergonomics of the furniture and fixtures, filing standards and efficacy of mechanical, electrical and lighting systems.

 

I have discovered I need less office space due to my spending the majority of each day in the field.  I now use my office for the occasional meeting, for receiving mail and packages, for preparing reports, and for production activities such as printing, scanning, and shredding.  Finally, I use my office less and less for storing paper documents.  Increasingly, I store documents, communications and brochures in the cloud and on an external hard drive.

 

Returning to the decreased Maryland space standards and the stagnant Baltimore office market, I theorized that many businesses had changed their spaces needs as had I.  Technology, which had spelled doom for manufacturers of rolling file cabinets in the 1990’s, was now wreaking havoc among office building owners.  Multiple-terabyte capacity hard drives, scanners, email and cloud storage were all conspiring to reduce the number and size of offices, desks, file cabinets, fax and copying machines.  This unruly gang was even chasing employees away from the office party.  File clerks, secretaries, receptionists and administrative assistants were fading in number and value.  Now, I often pass an empty receptionist desk when entering a client’s suite.  Increasingly, my clients are turning to web-based phone answering systems that can answer and forward calls, or record a voice message - with or without transcription.  Fax machines are now virtual and send output directly to email. And with respect to multi-line desk phones and desktop computers, most of my clients use untethered smartphones and laptops with a Wi-Fi or cellular broadband connection.  That’s how I operate.

 

Just as my colleague was ending his presentation, I realized the current office market malaise would probably linger a bit longer as office users evolve, recalibrate and adjust to this new age of recession-induced, technology-enabled productivity.  Low-cost technology is the current alternative to real estate and employees.