While it's not wide spread yet, there is a significant change happening in the use of large office space. In high cost office space venues, multiple business are comingling in one large office space. The walls and cubicles are coming down to open up more space where small businesses are reducing office costs by co-locating next to each other desk by desk. Accountants, attorneys, business consultants, and entrepreneurs are sharing open office space, conference rooms, and printers.
The new office space is reminiscent of the old office space. Especially that of large insurance offices and newsrooms where wall-less, open desk configurations were common in spaces up to 100,000 square feet. The difference today is that it's not a single business occupying the open space.
To be accurate, this new configuration isn't always completely open. Some businesses with multiple employees do choose putting up company walls around their space and they sometimes replace the commercial flooring. Still, to make it easier for new clients to find a particular business or a stand-alone entrepreneur, these open spaces install ceiling signs to show locations such as 2-B or 2-G. The 2 being the second floor of a large office building and the letter being the location on the second floor.
The economy continues improving with more than 2.8 million jobs have been added since last November. Of that, 39 percent have been office based jobs. The office occupancy rate is up 2.9 percent compared to a year ago and the future outlook expects this rate to continue.
Building owners embracing the share office space concept appear to be benefitting the most. However, this evolving office concept is creating a new opportunity in the real estate industry. A person known as a "sponsor" leases the office space (usually an entire floor) from the building owner. The sponsor then subleases the space by the desk and manages the shared services such as conference rooms and copy machines. Often, a cafeteria is included as an additional income stream for the sponsor.
This model is proving to be financially successful as average office revenues for this model are up approximately 30 percent compared to the individual business office model. Certainly, this office model is not yet wide spread. The heaviest concentration is in Manhattan but has spread to Brooklyn and Hoboken, New Jersey. This model is expected to expand in the markets of L.A., Chicago, Washington D.C, Dallas, Austin, and Miami.
It's difficult to say if this will become the dominate office model of the future. However, it will certainly grow and versions of it will eventually appear in suburban office buildings. It will also evolve. One evolution that can be anticipated is the concept of "share desk space". This concept has been in use for years by some large corporations that embraced telecommuting for office workers. Telecommuting typically requires the employee to come into the office one or two days a week. These corporations were able to reduce office space by having these employees report to a desk that they share with other telecommuters that report on different days.
Some professionals have reservations about this open space and shared use model from a security perspective in view of the now common mass shootings that occur at businesses. However, the office real estate sector is certain to figure out a solution to that concern.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.