The document summarizes the impacts of changing demand for office space due to workplace innovations. Key trends include companies needing less space per employee, more flexible work arrangements, open floor plans that encourage collaboration, shared or "coworking" spaces, a greater emphasis on location and amenities, and smaller average lease sizes. Sustainability is also an increasing priority and green buildings can command both cost and valuation premiums. Case studies demonstrate how leading companies are adapting their office space to attract talent and support changing workplace needs.

1. Workplace Revolution:
The Impacts of Changing Demand
for Office Space
Appraisal Institute
Symposium
March 22, 2014
Peter Carlston

2. Peter Carlston
CEO | Principal Broker
801.948.0899 | 650.533.3736
pc@elevationre.com
100 S. Main Street, Suite 609
Salt Lake City, UT 84101
www.elevationre.com

3. Sources
• Commercial Real Estate
Brokerages: Colliers
International, CBRE, JLL,
Commerce CRG
• MIT
• NAIOP
• Urban Land Institute
• CCIM
• Appraisal Institute
• CoreNet Global
• Vendors and Consultants:
Steelcase, Others
• EDCU, Utah GOPB
• Wall Street Journal, New
York Times, Forbes
• Glassdoor.com
• Appraisers
• Developers
• Corporate real estate
directors and clients
• University of Utah
• USGBC

4. First, a Story
Site selection: Any office park
will do, good freeway access

7. Site selection: Must be close
to CalTrain station
and hip urban core

14. Today’s Presentation
• Drivers of Office Demand
• Current Trends
• Implications for Value

15. Drivers of Office Demand
• Tech and
Communications
Innovation
• Younger Workforce and
Cultural Changes
• Changing Workplace
Strategy
• Cutting Costs

16. Driver: Innovation
• Industrial Age to Knowledge Age
• Technology and Communications

17. Driver: Innovation

18. Driver: Innovation

22. Driver: Younger Workforce
• Gen X: mid-60’s to early 80’s
• Gen Y / Millennials: 1978-1989 or 1977-2000
0
20
40
60
80
100
Boomers Gen X Millennials

24. Gen X vs Gen Y
• Gen X: Latch-key kids
• Gen X: Radicals
• Gen Y: Most parented
generation in history
• Gen Y: Happy
conformists

26. Millennials
• SUPER-Confident (all those trophies)
• Crave feedback
• Want stimulating, social work
• Less materialistic – it’s about Experiences …
and then Sharing Them
• Highly educated, technologically savvy and
ambitious
• Connected

27. Millennials
At the workplace, Millenials want:
• Flexible work hours
• Recognition
• Social work environment
• Cool, creative & inspirational space

28. Millennials
• Space is PLACE; key to culture and brand
• Vital for attracting and retaining talent!

31. Driver: Workplace Strategy
• Increased need for collaboration and flexibility

32. Driver: Cutting Costs
• Pressure to minimize costs and streamline
operations
• Corporate real estate managers focus on
cutting fixed overhead expenses and
increasing efficiency

33. Current Trends
• Less Space per Employee
• Need More Flexibility
• Open Floor Plans for Collaboration
• Shared Workplaces: “Coworking”
• Location As Important As Ever
• Smaller Leases
• (New buildings and efficiency / style
renovations)

34. Trend: Less Space per Employee
0
50
100
150
200
250
2010 2012 2017 Beyond

35. Trend: Less Space per Employee
• Filing space has shrunk from 15 to 20 percent
of office space to around 2 to 3 percent in
many cases today

37. Trend: Greater Flexibility
• Flexibility is a necessary strategy, no longer a
perk
• Essential to employee retention
• American Express:
– Hub
– Club
– Home
– Roam

38. Trend: Greater Flexibility
• Aetna:
• 35,000 employees
• 14,500 do not have desks at Aetna
• Policies impact 47% of workforce
• Rid of 2.7 million square feet of office space
• @ $29/sf, company has saved about $78M per
year!

39. Trend: Greater Flexibility
• Yahoo
• “A few years ago it was bring your own device
to work, now it's bring your own [butt] to
work.”
• Collaboration, not telecommuting, is the goal
• Innovation doesn’t happen in isolation

40. Trend: Open Floor Plans
• “I” space to “We” space
• Allocate workspace to issues instead of
people

41. Trend: Open Floor Plans

42. Trend: Open Floor Plans

43. Trend: Open Floor Plans

44. Client Case: Color Labs

45. Client Case: Color Labs

46. Trend: Open Floor Plans
• Backlash!
• High Stress
• Conflict
• High Blood Pressure
• High Staff Turnover

47. Trend: “Coworking”

48. Trend: “Coworking”

51. Cushman & Wakefield | Commerce to Bring
First Shared Executive Office Building to Park
City

53. Trend: Smaller Leases

54. Trend: Smaller Leases

56. Demand and Supply

57. Trend: Location Matters
• Color
• “Accelerated Serendipity”
• Near cultural amenities
• Near transit options
• Premium locations still matter
• “The City”

58. Trend: Sustainability

59. Trend: Sustainability
• “’Embracers’ have better stock prices, better
revenue growth, better everything.” MIT
• Economics
• 20,000 sf @ $18/sf = $360,000
• 15,000 sf @ $20/sf = $300,000

60. Implications for Value
• Lack of standardized, conceptual approach to
valuing green buildings
• Green premium data of limited use to
appraisers
• Brown discount unaddressed
• Limitations of DCF-based valuation approach

63. Implications for Value
• Office Demand
• Opportunities
• To Be Competitive
• How Much Space Needed?
• Future Space Needs
• Other Factors Impacting Demand
• Parking

64. Case Study: Adobe
• Campus helps Adobe win the "talent war“
• “Cross generational“ workforce
• Space demand is a pendulum
• What's more efficient, more sf per work space
or more meeting rooms and amenities?
• Timeless look outside, modular inside
• All about flexibility and variety.

71. Case Study: 222 Main
• 426,657 square feet
• Completed in December
2009 at a reported cost
of $125 million
• Designed by the
international
architecture firm
Skidmore, Owings &
Merrill

72. 222 Main

73. 222 Main
• SILVER LEED CERTIFICATION
• High performance glazing designed to provide daylight
harvesting
• Designed to operate 15% below the State of Utah
energy code
• Ability to integrate green technology within individual
tenant space
• Building located in a developed urban area with access
to existing infrastructure
• Portable water use for landscape irrigation & internal
use reduced by 50% and 40% respectively

74. 222 Main
Tenants
• Goldman Sachs
• Brinks Hofer Gilson and Lione
• Holland & Hart
• CBRE
• Hamilton Partners

75. 222 Main

76. 222 Main
• KBS Realty purchased for $400/sf, record-
breaking price in Utah
• Key reasons for KBS purchase:
– building’s first-class finishes;
– views of the Wasatch Mountains;
– key location in Salt Lake’s central business district;
– parking facilities; and its
– proximity to TRAX and City Creek shopping mall.

77. 222 Main
"This proves that an
outsider can come in from
out of state and build a
Class A building, lease it in
bad economic times, and
sell it at record-breaking
number for a profit.“
- Bruce Bingham,
developer of 222 Main

78. Thank You

79. Peter Carlston
CEO | Principal Broker
801.948.0899 | 650.533.3736
pc@elevationre.com
100 S. Main Street, Suite 609
Salt Lake City, UT 84101
www.elevationre.com