Commercial Real Estate, Capital, Insurance, Leasing & Management

Open Offices Close Downtown

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Yvonne Baker shares insights on office space trends and how they are affecting Jacksonville tenants and landlords.

For nearly three decades, the 1.2-million-square-foot suburban office park at 9000 Southside Boulevard was chock-full of bank employees – Barnett Bank, originally, and then Bank of America. But Iast year, park owner Gramercy Property Trust quietly rebranded the property, stripping “Bank of America” from its name. The reason: The bank had given back about 400,000 square feet of office space – about the equivalent amount of space as the entire SunTrust Tower in Downtown Jacksonville.

The bank didn’t get rid of the space because it had gotten rid of employees. Instead, the move happened as Bank of America followed a growing trend of large office users “densifying” their offices, packing more employees into the same or less amount of office space. The trend presents challenges for the commercial real estate market – especially in downtowns surrounded by sprawling suburbs such as in Jacksonville – with denser office users renting less room and requiring more parking for each square foot of office space.

“Since the beginning of the Great Recession in 2008, office users have not only reduced the overall pace leased but also densified the number of employees occupying the workspace,” said Yvonne Baker, managing partner for Franklin Street’s Orlando and Jacksonville offices. “Users are eliminating private offices in favor of more open and collaborative areas.”

As well as pushing up the vacancy rate, the impact of densification could cause much of the space built in Jacksonville before the 1990s to become effectively obsolete from a parking perspective: Denser offices exacerbate and push even suburban office parks to invest in costly parking structures.

Creating vacancies

As office users commit to denser offices, they’re able to cut the amount of space they need- to the point that the campus that used to house just Bank of America can now contain multiple operations.

The bank, without significant employee reduction, cut its office space by a third, going from occupying 1.2 million square feet to about 800,000 square feet.

Gramercy Property Trust, one of the largest real estate investment trusts in the world, worked with Colliers International of Northeast Florida to fill up the space.

In one of the best examples of densification in Jacksonville – and a potential sign of things to come – the park lured Aetna from its building along the Southbank in Downtown. 

The insurance giant had housed about 800 people in its 170,000-square-foot space in the Aetna Building along Prudential Drive without laying off anyone, the company will move to a 132,000-square-foot space at the 9000 Southside property now known as Gramercy Woods.

Another 50,000 square feet of space at Gramercy Woods was taken up by SS&C Advent, who put 330 employees in the space, with the possibility that more could come. 

When SS&C Advent designed its workplace, it decided to go open-office. looking to create an environment that would foster teamwork and collaboration.

The space has almost no personal offices, said Dave Welling, managing director and co-general manager of SS&C Advent – even Welling doesn’t have one, instead using a workspace next to the employees developing techno for their clients. 

“What I get from being quote ‘on the floor’ is I get to be part of the team,” he said. “People talk about an open-door policy; we’re trying to have a no-door policy.”

SS&C Advent moved into the office space in December. and Welling said the response has been “fantastic.”

“When you make a transition like this,” he said, “most people think about the things they are going to lose … but when we get into the space people realize what they have gained.”

Attracting Mlllennials

For SS&C Advent, the more modern design of the company’s office helps it attract young workers, who are increasingly becoming an important demographic for employers.

The company is not alone in that.

The entrance of millennials into the workforce has caused offices to change, Franklin Street’s Baker said, as younger workers value different office amenities than previous generations.

“Millennials are projected to make of the workforce by 2025,” she said. “This group requires more interactive, collaborative and technical workspaces. They are the workforce of the future, so their needs are being considered and met.”

More collaborative workspaces mean less room taken up by office walls, hallways and even cubical hardware.

The average square footage of office space per worker was 225 square feet in 2010. Today, as the proliferation of open-office concepts has caught on, that average has shrunk to just 150 square feet. Baker said some projections put the average square feet per employee as low as 100 square feet.

A PwC study that touched on densification noted that the idea is not space reduction for its own sake, designers say: It’s aimed at spurring collaboration and interaction.

“It’s about attracting the talent”- the manager of a Seattle firm said for the PwC study.

Of course, like all trends, desires may change.

“At some point, the novelty will wear off,” said an institutional investor interviewed by PwC. “We are going to see the pendulum swing back a little on this dense open-office configuration. I’m hearing more and more evidence that some of the new dense-space configurations are simply less productive than those that do have more privacy.”

 

For full article, visit https://www.bizjournals.com/jacksonville

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