Leasing Office Space and the Impact of Millennials

To frame the question of what impact Millennials are having on the leasing of office space, let's define what we mean by “Millennials.” The Washington Business Journal ( WBJ ) study titled “The Kogod Greater Washington Index: Millennials,” published in January 2016, noted as follows. There are currently four generations in the workplace, with a fifth about to enter:

• Silent ' Born 1920-1945. 2.3% of the work force. Age 70 +.
• Boomers ' Born 1945-early 1960s. 28% of the workforce. Ages 50-69.
• Gen X ' Born early 1960s-1981. 34.1% of the workforce. Ages 35-49.
• Gen Y or Millennials ' Born early 1980s-1996. 34.1% of the workforce. Ages 20-34.

The next generation is “Gen Z,” who were born between 1996-2013. They, together with the Millennials, will make up over 50% of the workforce within the time frame of a 15-year lease signed today.

The time frames above are approximate, and the behavior of the members of each group is not, of course, simply generational but also a function of early or late adoption of technology (among other things). The Kogod Study found that Millennials want the same things previous generations wanted; to find jobs, pay their bills, experience career advancement. And basic human needs in an office do not change: shelter, light, good HVAC, plumbing, cleanliness and easy daily access. What does change is technology.

Technology Considerations

The most recent change in how people work has been the smartphone. We are moving from “The Computer” to the smartphone ' to beyond. The smartphone has made technology easy and accessible at home, and “Why can't I have that at work?” has been the true game-changer. For example, in a recent law firm move, smartphones were used for punch list follow-up and tracking deliveries between everyone involved in the project.

With 80% of the buildings that will be here in 2030 already in existence, what should you be looking for when you sign a long-term lease? For individual buildings, some technology-enabling infrastructure criteria that are required are:

1. That building certifications are maintained ' LEED, Energy Star, etc.;
2. That the landlord continually tries to drive energy & occupancy costs down;
3. That the building allows for robust technology. What is the “Wired Score” of the building? Cloud computing takes energy use away, but creates other issues;
4. That there are different telecom vendors and separate chases within the building;
5. That the building has a strong IP Fiber backbone to monitor and control energy costs in real time and provide access for tenant applications, HVAC, security and surveillance systems, and tenant access systems; and
6. That there is good cell service from every area of the building and every adjacent space (even in the elevators and garage). Many new office buildings have a low-e coating on the exterior glass, which interferes with cell service. Ask about and try out the cell service when on a building tour.

The Physical Plant

The acoustic design of an office space will be even more critical. The issue of having loud telephone conversations in an open office plan is one that is culturally (and generationally) addressed. Many HR departments are also starting to institutionalize headset-use policies. For contract attorneys and young associates who do not handle client calls, perhaps an open plan works for law firms. However, there will still be a need for spaces with strict “quiet-car” silence policies. And closed offices will always remain necessary for heads of firms, for lawyers who handle confidential client matters and for other people due to their job functions.

A recent trend in the corporate world has been a dedicated space for recording Podcasts or for Video recording, as the cost of these technologies drops even further. Such a space should have no nearby plumbing, the HVAC should be quiet, and even the floor finishes of the surrounding area must be “soft” so as not to have sound transmission issues, such as heels clicking on a stone floor outside the room.

For individual buildings and spaces, some general criteria that we see are as follows:

1. A building with rectangular floor plans, with a small core and few columns, works best to facilitate flexible layouts and sunlight throughout the space.
2. Buildings with easy access to and from public transportation, and major roadways to areas where people live are best.
3. Buildings with amenity spaces, such as gyms, coffee bars, large conference rooms or conference centers, are most desirable.
4. The space will need to have energy-efficient lighting and natural light, which is one reason why glass is prevalent in current designs.
5. The office will need to be a shelter for creativity and innovation in order for a company to grow. Much growth and innovation is spurred by group interaction, not by individuals working on their own. It will need to be a catalyst for this to occur, with team rooms, huddle areas and informal gathering places, as well as the technology to support these spaces.

Location, Location, Location (and Flexibility)

In the upcoming years, the location of a building will become more important than ever, not only because of employee travel time, but aso because of proximity to the client base and to other services, such as airports and trusted vendors. The accessible live-and-work environments will continue to thrive while suburban office parks with no easy means of access will struggle to survive.

With Millennials, mobility is the norm. Space that is exciting and can draw people in will be a key to many organizations' growth and presence. Signage blended with branding becomes more important as physical offices become a way of building brand loyalty not only among customers, but among employees as well.

The concepts of flexibility, controllability and resilience will be even more important in the near future. Flexibility is needed to allow for changes in technology and work strategies during a lease term. This is particularly important in furniture. Controllability of systems ' for instance, lighting ' is a way to increase productivity and control costs. Resiliency not only means ensuring a back-up operations center and secure data center space exists for business continuity, but also that the location chosen is not subject to damage from weather extremes, not located in potential flood areas, and is accessible in the event of snowstorms and similar weather events.

With flexibility in the space also comes flexibility in the amount of space leased, length of lease term, and layout. Also important is the right to shed space if mobility catches on and more people work from home, or other locations become a requirement. We can't predict the future, but with real estate being most firms' largest expense, we do know that the ability to do more with less space will continue to be the mantra.

Elizabeth Cooper, a member of this newsletter's Board of Editors, is an International Director at Jones Lang LaSalle (JLL). Chris Murray is a member of the JLL Law Firm Practice Group. Frank Mobilio is an Associate Director/Vice President in the PDS Group in the Washington, DC, office of the firm.