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High Rents Drive Office Redesigns

Increasing rents prompt business leaders to consider better use of space.

The rising cost of real estate is fueling a trend toward "flexible" or "agile" office design, including unassigned and activity-based seating that reduces underutilized space. Average commercial rents have risen 15 percent, to $31 a square foot, over the past 10 years, according to Chicago-based commercial real estate company Cushman & Wakefield.

In big cities, the jump has been much larger. Rents in San Francisco increased 67 percent, to $73 a square foot. In Atlanta, they grew 27 percent, to $26 a square foot.

Real estate is typically the second-largest expense for a business, after payroll. But an average company uses only 40 percent of its office space, according to Cushman. Part of that is because of vacation and sick leave, remote work, and empty meeting rooms.

"You look at that [40 percent] statistic and you look at the price of rent, and something has to be done," says Jeff Lessard, Cushman's senior managing director of strategic consulting.

To read more on this topic, see Fine-Tuning the Open Office from SHRM's All Things Work newsletter.

Rental Rate Changes

Source: Cushman & Wakefield.


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