Designed to Be Effective

Building owners and managers have long battled against commoditization. It is easy for them to imagine, or even remember, a version of this hypothetical tenant soliloquy: We just need someplace to do our work. It’s just office space, after all. If you can’t provide it to us for the right price here, we’ll find someone who can. Any seasoned real estate professional knows that the traditional response touts some combination of a particular building’s location, amenities and service offerings that distinguishes it in the marketplace. Design has always been part of the equation, and a growing body of research suggests that “design” is becoming less about getting more people in less space for the least cost possible and more about something else.

That something else is effectiveness, which is devilishly hard to define and even harder to measure. For the real estate industry, the good news about the emphasis on effectiveness is that the commoditization fight is over. Whether it has been “won,” however, is a different question. For an occupier focused on effectiveness, the speech above may now go more like this: Our office space is a key cog in our unique value proposition. If you can’t provide an optimally effective work environment for us, we’ll find someone who can.

Workplace Transformation

From the occupier’s perspective, the phrase “workplace transformation” encompasses the shift from a real estate strategy based on efficiency metrics (like cost per square foot and square feet per worker) toward one that, at its roots, is about employees doing their work better, both as individuals and as teams. Jones Lang LaSalle’s Global Corporate Real Estate Trends 2013 study calls workplace transformation “the key for corporate real estate to unlock worker productivity and optimize portfolios,” noting that the pressure is on corporate real estate teams to deliver something more than cost savings to the organization.

The net effect on occupancy and rental rates is still a big unknown. CoreNet Global reported in February of 2012 that average office space per employee dropped from 225 square feet in 2010 to 176 in 2012. And according to BOMA International’s 2013 Global Tenant Survey, about one out of seven tenants (14 percent) expects further compression in its ratio of square feet per employee. On the other hand one out of ten (10 percent) is looking it increase the ratio, while another quarter (24 percent) are unsure. Add those up, and they still represent less than the majority (52 percent) who do not plan to adjust their efficiency ratios, but may nevertheless be transforming their space. There is no one solution for space providers.

“Transformation means a lot of things to a lot of people,” says Robert A. Peck, director of consulting for the southeast region at the architectural firm Gensler. According to Peck, the recession created some urgency for space efficiency. Online, digital information technology enabled space densification, particularly for tenants who executed a move. What is happening now, though, while related, is recognizably different. “What we’re seeing is a second phase: how can people be more productive?”

Collaboration and Focus

Dr. Tracy Brower is director of performance environments at Herman Miller, an office furniture supplier. She is not alone in believing that collaboration is a major factor in increasing worker productivity. “One thing we’re seeing with our customers is that the cognitive complexity of their work has increased so significantly that no one person has all the necessary information,” she says. Collaboration is thus the natural progression of the knowledge sector, and it demands new and different kinds of space. The challenge for the real estate industry at large is that one size does not fit all, even within the same tenant organization. It can be very difficult to design the right mix of collaborative space for a given occupier. If there is one area of consistency in the workplace transformation trend, however, it is a movement toward visibility. “If we’re sitting where we cannot see people, we tend to forget about them,” says Gensler’s Peck. “In an open environment, it’s harder to forget. So you can facilitate collaboration without forcing it.” Another common theme is increased acceptance — and even encouragement — of purely social interactions among employees. “We have clients implementing coffee bars or drink stations,” notes Brower, “and what is happening is that people are getting up, making coffee and talking about the social, which very quickly shifts into talking about the business and the customer.”

Brower’s company Herman Miller is taking collaborative design to the next level with its redesign of the Mars Drinks headquarters in West Chester, Pennsylvania. The campus—which already boasts an open floor plan—will now be a place of education as well. Mars Drinks has been studying how tenant amenities, such as hot beverage systems placed in a collaborative environment, impact employee satisfaction and creativity. The education element of their redesigned space interweaves class curriculum with real-world examples. “With the new design, we actually will have a balcony that overlooks the collaborative work environment,” explains Mars Drinks Vice President of Business Development Frank LaRusso. “You can go into a classroom, learn about the impact of our product and then come out of the classroom and see it happening live.” (For more on how hot beverage stations impact collaboration, see “From Coffee to Collaboration”.)

Companies must take care, though, that their office space does not sabotage their employees when they need to buckle down on their individual work. Gensler’s 2013 U.S. Workplace Survey found that knowledge-sector spend a majority of their time (54 percent) in the “focus” mode, up from 48 percent in 2008. And even as more firms have sought to increase collaboration, something strange has happened to the amount of time actually spent in “collaboration” mode: it has gone down to 24 percent from 30 percent in 2008. What might account for this?

Peck thinks part of the answer is that, while emphasizing collaboration, firms have failed to provide enough of the right kind of “focus” space their people need. “Some people thrive in an environment that is buzzing [to perform their ‘focus’ work], but many others need an area free from distraction,” says Peck. “If the traditional office didn’t have enough collaborative space other than large conference rooms, the other extreme can be a problem as well.” Tracy Brower would agree that simply throwing more meeting space at the collaboration issue is not the best way to make employees effective in their various work modes. “Our research suggests that 70 percent of collaboration actually happens at individual workstations,” says Brower. Rather than scheduling a meeting room to discuss ideas, she says, employees will go directly to the place where they know their desired collaborator will be: the individual’s workstation. “That is a ‘threshold’ moment. We converse and make decisions, and that’s where most collaboration goes on.”

Variety and Flexibility

There is an implication here that may be uncomfortable both to corporate real estate executives and to the property managers who serve them: the emerging workplace needs a number of different settings that give employees some choice as to where and how they work. Building in this kind of flexibility is never easy, and in the real estate world, “flexible” space often equates to “more” space, which means corporate real estate executives may not achieve the efficiency ratios they might hope for. So are the benefits worth this cost? “The really key thing is that the space be accountable to the organization,” says Brower. If workplace transformation means more flexibility for workers, then it also needs to help workers be more effective. There is evidence that it does. At Gensler, employees have ultimately proven more satisfied when their space is redesigned to give them more choice. Says Peck, “Most firms do this every ten years or so, whereas we have the advantage of doing it dozens of times a year, so we can introduce new ideas to them.” People may not like the changes at first (particularly those who may have lost some personal space or privacy), but Gensler’s Workplace Performance Index, an ongoing survey of the firm’s clients, shows that, after an adjustment period, employees say they are more productive in the new space.

Measuring that blend of workflow and innovation has always been a clouded proposition. What is clear, however, is that the design of the space itself is now being asked to contribute to this kind of effectiveness. Location and amenities are no longer enough to distinguish a building. For that matter, neither are things like environmental sustainability and health and hygiene features, which are quickly becoming must-haves for leading tenants. No longer is a building simply a place for the team to meet to do its work. Rather, it has now become, in a very real sense, part of the team itself. The optimal office space must now be designed to be effective.