Office Space: Enough is Enough

In a previous entry I discussed my amazement at the striking size differential between the typical housing unit in the U.S. and Hong Kong. The average Hong Kong resident occupies only a fraction of the living space of a typical U.S. citizen. This economy of space usage also extends to Hong Kong’s Cathedrals of Commerce. We heard tales of office space per employee ratios as low as 100 square feet. This compares to somewhere in the range of 200 to 225 square feet per office employee in the United States. While this may be an exaggeration (I have not been able to verify the typical ratio in Hong Kong), our visits to various office buildings and discussions with market participants suggest that it is not a wild one. This makes sense as Hong Kong’s office space is the priciest in the world, while ours is relatively cheap, but cultural factors are likely also at play.

I can’t help but to wonder how this influences productivity. While the Hong Kong offices we visited appeared to be somewhat cramped and cluttered, they seemed functional nonetheless. Does closer proximity to colleagues stimulate greater interaction and collaboration between workers, which might enhance idea generation or lead to faster project turnaround times? Hong Kong office workers would certainly have a harder time getting away with playing solitaire at their desk. Or do these tight quarters foster claustrophobia and a lower sense of well being that might reduce productivity? What happens when the inevitable sick employee insists on coming to the office anyway, spewing their germs about in a much denser environment? Perhaps this is only an American thing. I would guess that smaller offices would at least reduce paper costs – as there simply isn’t a place to store hard copy. This is certainly desirable from a cost and sustainability standpoint.

Could the U.S. potentially achieve this level of space efficiency? We clearly don’t have the same economic need as office space is relatively cheap in most of our markets and our productivity is high by global standards, but there certainly has been a lot of talk (and some action) in the U.S. about using office space more efficiently. Office space efficiency is likely to receive more attention as U.S. firms look for more ways to wring out costs in an increasingly competitive global economy. This has potentially ominous implications for our office markets. Given our relatively slow rate of office employment growth, even a 25% reduction in space per employee would imply that we have enough space on the ground to last a very long time. On a positive note, think of all the resources we would save if we used our existing space more efficiently and didn’t have to build the next 2.5 billion square feet of offices.

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