Technology has changed why we need to go to an office. Most of the work we used to do by ourselves at a desk, whether in a private office or a large bullpen, can now be done almost anywhere because of the pervasiveness and capabilities of mobile devices. However, advances in technology do not mean we no longer need any private space at work or that it’s just as productive to sit daily in a different spot (à la hoteling) rather than in a dedicated work space.

A New York based money center bank recently eliminated all private offices in its headquarters and most employees will not get their own assigned desks in a new homogeneous “open plan” configuration. While the rationale for this dramatic change is to encourage employee interaction and reduce occupancy costs, the likelihood of success of either goal is questionable at best. A friend of mine is a relationship manager for high net worth individuals at this money center bank. He relies on support from staff in a range of departments to best serve his clients. He can’t depend on calls or e-mail to ensure he receives the proper internal support and prefers to meet with colleagues in person from whom he needs a work task completed. Under the new bank’s space regime, my friend has no idea from day to day where the “hoteling” staff can be found.

Shifting staff out from private offices to open bullpen settings does force a certain amount of “bumping into each other” interaction. But unless there are sufficient meeting spaces of different sizes and configurations — both for formal conferences and for more informal brainstorming — real collaboration can be challenged in an open plan environment. Bloomberg L.P. is often looked to as a model for how its vast open plan configuration has eliminated barriers to interaction typical in a hierarchical office-intensive environment. But at Bloomberg’s Upper East Side headquarters, the shortage of conference rooms is so severe, staff is only allowed access to a conference room if they can prove they are engaging with an outside client or resource. So outside of a large central café area with few chairs, Bloomberg’s headquarters lack available places designed or allocated for staff communication and teamwork. From scientific studies of learning, we also know an open plan environment is just too distracting for individuals with conditions such as ADHD who need privacy and enclosure to focus on tasks and perform effectively.

We still need to go to the office in order to share ideas with colleagues and often to work as a team on initiatives and strategies. Eliminating private offices and other “densification” strategies generally reduce occupancy expenses per employee. But the employee productivity and retention implications can be profound if occupancy cost reduction becomes the main driver for a company to adopt one monolithic space figuration and little attention is given to the kinds of spaces employees and teams desire. Giving employees a greater say in the type of workspaces available may be part of the solution. We know that losing and replacing talented employees, particularly in a tighter labor market, can be extremely costly and that millennials demonstrate much less corporate loyalty than their generational predecessors, particularly if a firm is not aligned with their values and work style.

Co-working spaces, like Grind NY have been quite successful in providing their tenants a broad choice of work settings. At Grind NY, one can choose to work in a bright open bullpen, in a private, dedicated room, in a shared and demarcated quiet area of open cubicles, or in an enclosed team room for five to ten staff.  In addition, a range of collaborative spaces — from open cafés to AV-intensive team rooms — are available for a project or meeting-specific purpose. Perhaps this range of choices provides a more appropriate model for corporate America that a single monolithic office space program where “one size fits all.”

         

1. Putting cost far above all other criteria.

Real estate occupancy expense is a significant cost for most businesses. But to focus singularly on rent per square foot in today’s environment is short sighted at best. In a tight labor market, the choice of neighborhood and the appeal of a firm’s office space may be critical to attracting and retaining talent, particularly if a firm seeks to appeal to Millennials, who not only appreciate salary and benefit opportunities, but want to work in an environment that reflects the values of the company for which they work. The quality of space, particularly if its character and design supports collaborative creativity, may also generate important productivity advantages. An office space’s efficiency–how the rentable square feet (the square footage on which a tenant pays rent) correlates with programmable or “usable” space–may also make pure per rentable square foot cost comparisons erroneous.

2. Focusing on the space they need today rather than what they will need 18-24 months from now.

Time moves quickly. And most office leases are five to ten years in term. Too many companies, particularly those in growth mode, decide on an appropriately sized space based on their anticipated head count within only the first year of the lease. Some worry about taking on too much space before it’s needed, but the reality is the ability to offer surplus “desk space” to other firms if a space temporarily under capacity may be negotiated in a lease.  And it’s far better to anticipate growth than to make do with overcrowded conditions.

3. Believing that only taking “sublease” space can provide the most flexibility and cost efficiency.

It is true that sublease office space is generally less expensive than space leased directly from a landlord. In most cases, however, a sublet must be taken in “as is” condition, with minimal financial contribution from the sub-landlord to modify the space to suit a subtenant’s requirements. Typically there is no flexibility in the sublease term and the subtenant has little leverage in negotiating a favorable rent for a term beyond the sublease expiration. In contrast, leasing directly from a landlord may provide for customization of the space either built by the landlord or by the tenant with a landlord’s “contribution” subsidizing the cost. A direct lease may also provide for options and flexibility to accommodate potential occupancy growth.

4. Not anticipating how long the space acquisition process will take, particularly when a lease expiration looms.

When one rents an apartment directly from building management, the lease process typically takes less than five days. In contrast, negotiating an office or retail lease can take from two to eight weeks, depending on the attorneys involved, the complexity and length of the lease and other factors. Prior to lease negotiation, the site selection and business terms negotiation process can take from one to eight weeks for an immediate requirement that is well defined and much longer if a real estate occupancy strategy must be developed to align with business goals.

5. Planning for furniture too late in the space acquisition.

Too many tenants consider furniture planning and acquisition an afterthought. This is unfortunate for two reasons: First, the lead time delivery of contract furniture can be four to six weeks. So, even if a space build-out is complete, the absence of installed and wired furniture means a tenant cannot open for business. Second, the placement of furniture in a space is critical to space planning, particularly for the wiring of furniture for voice and data technology which must be coordinated with the siting of voice and data ports in an office. Particularly when a landlord builds a space out on behalf of a tenant, planning how furniture will be situated and wired should be incorporated into the space design process.

6. Allowing first impressions to overwhelm rational decision making.

When touring an office space, there are lots of factors that may influence an initial impression: for example, time of day/natural light and existing lighting or density of existing partitions and furniture. It’s always best to tour space when the sun is out and it’s early in the day, but this is not always possible. Too many times a potential tenant may rule out a space in less than a minute because of a negative first impression. Spend a little time and possibly listen to the guidance of an advisor who recommends whether a space is worth a second look.

7. Not understanding a landlord is interested in the financial condition of the company actually signing the lease.

It doesn’t matter how large or successful a related or parent corporate entity may be, a commercial landlord is only interested in the credit worthiness of the actual business entity signing the lease or providing a full corporate guarantee. This is often particularly challenging for non-US-based firms that establish new US companies to operate here. Landlords do not care about the revenues or profitability of the foreign parent and do not want to pursue a foreign parent if the US tenant defaults.

A related concern is the “good guy” guarantee. Most landlords require this limited personal guarantee from a US citizen or green card holder for nearly all privately held tenants, no matter how credit worthy. The intent is to ensure, in the event of a bankruptcy or some other rationale for a tenant stopping rent payments, that the Landlord will not have to serve an eviction to get back clean possession of the leased premises (in order to lease to a new tenant).

Flaneur, from the French noun flâneur, means a stroller, a saunterer or a browser. A Flaneur does basically what we used to do in a book store or in a record store (remember those?) and what some people still do in clothing stores – that is walk into a store without a specific purchase in mind and wander around aimlessly browsing the shelves, record bins or clothing racks for something that catches our eye and that we might be tempted to purchase.

We don’t generally shop on the Internet as a flaneur—nearly all web purchases are deliberate (97% of sales on Amazon are planned). Perhaps preserving brick and mortar stores as a generator of sales and brand outpost, particularly aimed at the luxury shopper, will depend in part on restoring the flaneur appeal of the store experience which is largely absent from Internet shopping. This was one of the things I learned at The Future Laboratory’s recent US Luxury Futures Forum.

For example, SoHo House Berlin has redesigned its entire ground floor, which is open to the public, renaming the floor The Store. But this “store” actually blurs the distinction between hotel and retail. The SoHo House ground floor includes lobby, restaurant, lounge, check-in and concierge services, but includes no structural distinctions or visual demarcations of a retail outlet. Instead, every candle, every vase, every piece of furniture and every wall covering in the space is actually for sale. A visitor to SoHo House, without a predetermined intention to purchase anything material, may be likely to become a “flaneur” on this floor and potentially a retail customer, as they wait to be seated for dinner or to check-in for the evening. Visitors also experience a highly curated environment that signifies SoHo House’s positioning at the cutting edge of the creative industries, to which it targets its membership and hotel rooms.

Closer to home, the architect Marco Marcellini encouraged me to stroll through the Fifth Avenue Valentino store, recently designed by the British architect David Chipperfield, and compare this experience to the new 57th Street Fendi store which Marco designed at Peter Marino Architect. My impressions of the Valentino store are that it is a minimalist container for showcasing couture and accessories. The materials and finishes are stunning and are replicated throughout – gray terrazzo and bare marble floors and walls and elegant bronze and glass vitrines. But my eyes were drawn more to the articulated clothing racking systems on the men’s floor than anything else particularly distinctive. The store’s architecture appears to be working very hard not to distract one from the clothes inside and, while it is a beautiful showcase, the boutique is really not that memorable and in its minimalist desolation, a bit intimidating. In contrast, the architecture and design of the Fendi store is far from minimalist. The finishes and materials vary between selling departments and include stitched leather, fur and petrified wood wall coverings. The displays for accessories, shoe and bags are sometimes recessed into the walls and sometimes they protrude, but they are designed to be perceived as seamlessly integrated into the architecture of the store and not as add-on fixtures. Most significantly, each departments’ accommodations seem designed to be experienced like a unique room and create a distinct and expressive context shopping (or just browsing).

I’m often asked what is the “best” office building in Manhattan. About ten years ago, in fact, I was asked this question

by a reporter at the now defunct New York Sun. I talked about how swanky buildings like the General Motors Building, 9 West 57th Street, the Seagram’s Building and Lever House, with their “plum locations, trophy modernist architecture and overall cachet” clearly made them the most desirable. Even five years ago, I probably would have provided a similar response. Today, in contrast, I categorize buildings like Chelsea Market, the Starrett Lehigh Building and perhaps even Industry City in Sunset Park, Brooklyn among the most desirable of New York office structures. What has changed? It’s not that prime post-war Plaza District office towers like 9 West 57th Street have lost their cac

he with top-tier hedge fund scions and private equity fund managers. What has rapidly evolved perceptions of the ideal work place is the impact of technology on how we work and the shifting demographics, tastes and type of firms driving job growth in New York.

Where C-Suite executives actually live has already been an important driver in the choice of an office location. For decades this has helped make the office buildings of Midtown East offices particularly attractive as so many executives lived on the Upper East Side or commuted from the suburbs into Grand Central Terminal. Large financial services firms are now a less dominant employer in the city as technology, creative and media firms have become engines of job growth. Today’s executives, particularly those younger than 45, are increasingly drawn to live as well in neighborhoods like Chelsea, SoHo, Tribeca or Dumbo. And this is impacting the relative desirability for offices of neighborhoods across industries.

But the shift in office preferences is more than just about a building’s locale. The ubiquity of mobile devices allows us to productively do many kind of work tasks anywhere – at home, in a coffee bar, or even on an airplane. Most of us still need to be affiliated with a “workplace” and more companies now recognize that the essential purpose of the office is to help attract and retain the best talent and to provide opportunities for face-to-face collaboration to drive performance and innovation. Millennials, who will soon dominate the corporate workforce, prefer to work in 24-hour mixed-use neighborhoods with shops, restaurants and active street life – ideally close to where they live. They also are exceedingly brand conscious, not only in terms of what products they choose to buy or rent, but in how they experience the spaces in which they live and work. Formerly industrial, side or-multi-core buildings like Chelsea Market, with their mixed retail/office vibe are ideally suited to allow companies to create branded, team-oriented office configurations. Center-core, prime office buildings, like the duplicative 1960s office towers along Sixth Avenue in the 40s, where divisions of offices and bullpens typically ring a large center-core of mechanical space, are less appealing today to firms looking to stimulate collaboration, learning and experimentation.

Sunset Park, Brooklyn, was never considered a particularly accessible location to attract Manhattan-based firms. But the concentration of tech-savvy millennials now living in Williamsburg, Bushwick and beyond has changed the equation and made this waterfront location attractive. Industry City is a 16 building, six million square foot industrial and mixed-use property in Sunset Park currently going through redevelopment. The complex’s food hall, programmed exterior spaces for gatherings and outdoor activities, WiredScore connectivity certification, maker’s guild for design, production and sales of furniture, jewelry and crafts have all combined with a tempting lease pricing structure to attract Manhattan tenants like Time, Inc., which is in the process of relocating its Technology, Content Solutions and Editorial Innovation departments there.

As the pace of change accelerates, some of us may find ourselves in five years working in neighborhoods we never knew even existed today.