THE IMPACT OF OFFICE SPACE ON EMPLOYEE PRODUCTIVITY AND IMPLICATIONS FOR OCCUPANCY COSTS

The trends of office space densification and flight-to-quality are hot topics in commercial real estate markets across the United States. The financial crisis that incited the Great Recession led to widespread acceptance and acceleration of these trends. Densification-the reduction in square feet occupied per employee – proved to be a simple way for companies to cut costs. At the same time, rising vacancy and flat-to-declining rents in office markets across the U.S. allowed many tenants to lease higher-quality space while still achieving cost savings. These trends have gamered much attention in the commercial real estate industry, and while there has been increasing anecdotal evidence of their impact on productivity, there has been little empirical study.