Office space shrinking in Indianapolis area

When office broker Jon Owens got into the commercial real estate business in the late 1980s, the rule of thumb for most tenants was to allot 200 to 250 square feet for each employee. Some organizations, especially law firms, would use twice that much space for each worker.

That ratio shrank slowly before plummeting in the years following the Great Recession. The average space per office worker dropped globally from 225 square feet in 2010 to 150 square feet in 2013, according to a survey by CoreNet Global, an international association of corporate real estate managers.

About half the survey respondents predicted 100 square feet per worker will be the norm by 2017. Call centers already get by with such an allotment.

Real estate and interior design experts say the shrinkage movement is driven by several factors, but Owens, managing director of Cassidy Turley’s Indianapolis office, said one reason is obvious.

“It’s mostly driven by economics,” he said. “Office space is expensive. In some

cases, it’s as much as 25, 30 percent of an organization’s budget. If they can reduce their footprint by 15, 20 percent or more, there’s a real savings in that.”

Tech giant AT&T, for instance, started a telecommuting program and began shaving real estate nationwide several years ago as its office leases came up for renewal. The national program, which included Indianapolis, has saved $550 million per year, according to a General Services Administration report.

Locally, the space-saving trend has been embraced by a number of well-known companies, including ExactTarget, Eli Lilly and Co., Rolls-Royce Corp. and Roche Diagnostics.

Even law firms are getting into the act.

Ice Miller LLP, the city’s third-largest law firm, is reducing its space from nine to seven floors at OneAmerica Tower, on the northwest corner of Illinois and Ohio streets. Bingham Greenebaum Doll LLP recently shed one of its six floors at Market Tower, 10 W. Market St.

Ice Miller will save a hefty six-figure sum per year by reducing the space, Phil Bayt, one of the firm’s managing partners, told IBJ.

By design

Space planners say economics are only part of the reason for the office-space reduction trend. Many companies are reviewing the way they do work in the modern, technology-driven world and redesigning work spaces to reflect the changes.

“The days when office designers put a bunch of offices around the outside of a space and rows of cubicles in the middle are going away,” said Jenny Schott Androne, president of Indianapolis-based Schott Design Inc. “Offices are much more functional. People are working much differently because of technology, and they are looking for a more open, collaborative environment that gives them more flexibility.”

Open floor plans have become the go-to design in corporate America. In fact, about 70 percent of U.S. employees work in open offices, according to the International Management Facility Association.

Typically, open offices feature smaller work stations, often used by multiple workers. “Hoteling” systems are sometimes incorporated so employees can reserve space on an as-needed basis. Technology allows such setups because many employees no longer need dedicated personal computers. Instead, they can take their notebook computers or iPads to any station and plug in.

Companies with large sales forces have embraced shared spaces because studies have shown that many salespeople spend as much as 75 percent of their time out of the office, said Melissa Browne, an interior designer and president of Indianapolis-based Relocation Strategies, which specializes in corporate moving planning.

Done properly, open-floor plans also require quiet rooms for privacy when needed, “huddle” areas for small meetings, and larger social areas where collaboration can take place. Open-floor designs also inspire innovation and creativity when they feature lots of natural lighting, plants and colorful design, experts say.

Major office-furniture makers like Herman Miller, Steelcase, Knoll and Haworth have seized the moment by rolling out new lines of open-office products in recent years, including flexible walls, long desks where multiple people can work, and seating and work stations that accommodate the latest technology.

Let’s get smaller

When office cubicles are still necessary, their sizes are getting smaller and the walls are getting lower. The 8-by-10-foot cubicles common 20 years ago have become as small as 5-by-5. Common wall heights have fallen from the traditional 66 inches to as low as 34.

Private offices also are being reduced in numbers. Once regarded as a perk or a symbol of executive status, dedicated personal space isn’t a big motivator these days, experts say.

“It’s a generational thing,” said Browne, citing research by demographics theorist Richard Florida. “Technology and flexibility are much more important to the younger worker than having their own office.”

Some types of companies can’t get by without some private offices, especially legal firms or health care businesses required to follow privacy laws. But even law firms are shrinking personal offices 20 percent or more.

Ice Miller trimmed its footprint at OneAmerica Tower by shrinking individual offices; reducing space for human resources, accounting and human resources; moving some IT functions to cheaper off-site space; cutting break-room space; and drastically cutting the size of its law library.

Small problems?

Open-office design has drawbacks. One of the biggest problems created by putting more people in smaller places is the possibility of added noise, space planners say.

Interior designers are able to overcome the issue in most cases through better acoustical design and by using more sound-absorbing materials. Many companies install sound-masking and white-noise systems.

Parking also can be a problem when companies increase employee counts in older buildings designed for fewer workers.

Recent reports are revealing other complications in offices that contain more collaborative space.

A study by the Scandinavian Journal of Work, Environment and Health showed workers in shared-space setups took 62 percent more sick days than workers in single-occupant layouts.

Researchers from Virginia State University and North Carolina State University said open-floor design can lead to lower productivity. Workers in such environments, they say, often complain of more distractions, a lack of focus, decreased job satisfaction, reduced motivation and a perceived lack of privacy.

Other experts say too much collaboration can actually stifle innovation and creativity by leading to group-think.

Space-planning experts say employees typically require an adjustment period when it comes to sharing spaces. And many require training to learn how to manage the new work environment.

Real estate authorities say it’s likely to take many more negative findings before companies reverse the shrinkage trend, especially during a lackluster economic period when the potential cost savings are so great.•