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One of the most important—and often overlooked—space metrics is space-per-person . It is the measure of how much space an employee needs to work comfortably and productively. Back in 2012, architects and planners Gensler identified certain benchmarks according to type of firm and required square metre per employee.
For call centres, it ranged from 5-16 m2; for technology firms, between 11-14m2, for finance firms, between 10-23m2; for engineering firms, between 14-17m2, and more.
Even by 2012, trends were clearly identifiable. First, the balance between personal and collaborative space was shifting. Second, the range was increasing, both between firms within the same industry, with leading firms taking more, and across industries.
Worldwide, office space per employee has shrunk by around 10% since then. Architects responded in a range of ways, some even suggesting higher density but multi-use spaces based on the café model .
Third, as a result of such variation, traditional and mechanical urban planning modelling, using benchmarks to link office space requirements to employment numbers, was already becoming obsolete. Developers around the world, however, with some elegant exceptions often powered by anchor tenants, mostly preferred to look the other way and continue building central business district (CBD) office towers.
Regulators and governments continued to promulgate standards, such as this from Queensland in Australia: ‘The office accommodation workplace density benchmark target for agencies is a maximum of 12m2 per person assuming a one Full Time Equivalent (FTE) to one desk occupancy ratio’ .
In the UAE, there has even been a minimum office space requirement per visa, which depending on the licensing authority, can be 7m2 per employee, as in Ajman, or even historically up to 12.5m2, as in some free zones.
However, several free zone office providers already had had offerings down to 3m2 per desk. The Dubai Economic Department Sustainability Desk has a minimum office space of 4.6m2 while Dubai International Financial Centre (DIFC) and some of the other free zones also offer freehold ownership options or ‘hot desk’ solutions for start-up satellite companies with one or two employees; an office is not even required .
Even before COVID-19, firms in the UAE were bringing pressure to relax office space requirements, in particular to extend exemptions to medium and even larger companies.
What is happening now? Several architect, consultancy and planning firms have made complex suggestions centred around attempts to maintain social distancing in the office environment. While some firms have taken this up, the overwhelming majority of firms have relied on work from home (WFH) and common sense to achieve the same objectives. WFH has not caused a fundamental reassessment of working practices: as soon as they can, employees are returning to their offices.
This disparity has been mirrored by the actions of regulators. In heavily regulated jurisdictions, they have enacted specific rules, translating expectations of social distancing into minimum space regulations. In Queensland again, for example, public authorities have limited the number of people in an enclosed area to one person per four square metres . In the UAE in the early days of the pandemic, two-metre social distancing, combined with the 30% maximum workforce in the office, briefly created a facsimile of such regulations, but these were designed to be temporary and were easier to lift.
What might happen once we return to ‘normal’? Pressures to decrease the density of workspaces, and reduce the volume of collective spaces, counter the need to control costs in what is almost certain to be a global recessionary environment. Initially, as with any global economic downturn, space per employee will rise, as leases remain obdurately fixed, at least for the higher-grade offerings. Longer term, however, with the standard gross-to-rent percentage ranging anywhere from less than 1% up to double figures, depending on the industry , global corporates have plenty of incentives to continue to reduce their office footprint irrespective of COVID-19.
Although there will be differences between industries, modelling the trend of the past two decades while introducing assumptions about technology, flexible working spaces and WFH has suggested that average sq m per employee could well halve over the next decade, while maintaining at least approximately the same level of social distancing that existed prior to COVID-19. As a result, rent-to-sales ratios of 15%, which used to exist for professional firms are set to fall towards the much lower percentages typical of manufacturing. The gradually increasing focus on rent-to-sales ratios should also drive the more widespread acceptance of turnover-based rents, even outside the retail sector where they originated. Whether and when COVID-19 recedes as a business priority is secondary.
If history is any guide, pandemics do not last, and corporate memories are notoriously short. Scepticism over what is likely to be only a temporary change in behaviour is therefore surely justified.
Longer-term trends towards a lower sq m per employee, however, are driven by economics and technology and will persist. Their reinforcement, and not convoluted mechanisms for the preservation of social distancing, will, on the basis of previous experience, be the long-term office space legacy of this pandemic.
The redevelopment opportunities for developers are truly immense, and are only now beginning to be fully appreciated in real estate markets across the gulf.
This article was originally published in Construction Week
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