by Marc Kushner, The Informed Appraiser

“The best way to realize the pleasure of feeling rich is to live in a smaller house than your means would entitle you to have.” -Edward Clarke

Over the past few weeks, there have been several news stories published on the the topic of shrinking office sizes. One good example is this CNN article. The gist of it is that on average, employee spaces have been getting smaller over the past two decades. According to International Facility Management Association, in 1994, the average office worker had 90 square feet of office space, but the area had been whittled down to 75 square feet in 2010. (Interestingly, executive management spaces have actually increased in size over this same period.) I suppose there is a limit to how small cubicles and offices can become, given that people are not getting any smaller. But the trend toward smaller offices may well continue into the next decade.

What are the implications for commercial real estate? For one thing, this will likely put downward pressure on the growth in demand for office space. If office employment increases by 5% while average office space per employee declines by 5% over the same period, there would be zero net gain in office demand. Existing office buildings that are designed with larger offices may experience functional obsolescence, and owners may eventually need to redesign existing spaces around smaller offices in order to remain competitive. The increasing prevalence of telecommuting may also make office location a less significant factor that it has been historically.