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Does Corporate America Have Too Much Office Space?

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Nasdaq 4/30/10 - Corporate America has 25-50% more space than it actually needs, particularly as tenants move toward more open floor plans, more staff work remotely and companies reduce costs by cutting the amount of space allocated per person. That's the view of Howard Ecker , president of Chicago-based tenant representation firm Howard Ecker & Associates . "Companies have gone from offices to cubicles and now they are going to benching," he said.

Space per person has been in the news lately, with Goldman Sachs reducing its space per person from 228 to 178 square feet and famously putting a number of less-senior executives in internal offices without windows when it moved to its new headquarters building in New York. But Goldman isn't the only one. Over the years, law firms have gone from 750 square feet per lawyer to 500. "They are now going down below that," Ecker said. Advertizing agencies once had 250 square feet per person and now have less than 100, he added.

Bob Stella , president of New York-based tenant representation firm Cresa Partners , said more companies have staff that telecommute or use hoteling, where more than one staffer uses the same workspace. "All companies are looking at ways to be more efficient. It's possible to create a great working environment and do it with less space," he added. "You can virtually be working on your laptop from home and perform a lot of the same tasks."

Although the office market isn't there yet, Ecker believes that changing demographics will have the biggest impact on office space needs and cited the emergence of the Echo Boomers, or the Millenials, who are entering the workforce. "Four percent of the workplace is 65 and older and 50% is 45 and under. As they disappear and younger people start to make decisions, the complexion of the office environment will change," he said. "The younger the decision maker, the less space they will take."

In an extreme case, the need for less space could ultimately stamp out new office development, Ecker said. "If we have 25-50% more space than we need, why build another office building? A lot of people say they have to be in new buildings because they are more efficient. But new buildings aren't inherently more efficient," he said. Finally, using less space is also a much greener option. "Green is a really big issue today. The U.S. government can't lease space in a building that isn't LEED certified and they are leading the charge into efficiency," he said. "The greenest thing that can be done is to use less space."

Source: NASDAQ.com

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