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Friday, August 31, 2018

Are open office layouts hindering collaboration?

By Dominic Perkovic (New York City)

Office co-working space has garnered much attention recently. Through the first half of 2018, co-working made up 10% of all leasing activity in Manhattan. The previous year, co-working space accounted for just 3% of overall leasing activity in the borough, as reported in Avison Young's Second Quarter 2018 Manhattan Office Leasing Snapshot Avison Young's Second Quarter 2018 Manhattan Office Leasing Snapshot . WeWork completed two deals in the 30,000 to 45,000-square-foot (sf) range while Knotel signed five deals in the 13,000 to 45,000-sf range.

                                                                                     Source: Stockphoto LP

WeWork, the behemoth co-working company valued at $20 billion, has no desire to slow down its expansion as it moves into development, leasing, and property management services.  Amidst the expansion, WeWork is in talks with SoftBank for a potential investment that could double the firm's valuation to $40 billion.

With companies like WeWork and Knotel taking up large swaths of square footage in New York and across North America, it is safe to say that co-working development once considered a fad, has become mainstream. Co-working space lease activity shows no sign of slowing down, but does a co-working environment actually do what it is intended to do?

The rationale behind open plan office layouts is that they increase connectivity between workers by breaking down barriers. A lack of cubicles and partitions should, in theory, increase engagement between workers, allowing for more teamwork and higher levels of productivity.

                                                                                    Source: iStockphoto LP

Knotel, the new kid on the block, began its ascent in 2015.  Today, the firm has grown to more than 40 locations in New York, San Francisco, and London.                                                                           

A new Harvard Business School study  demonstrates that, in fact, the opposite occurs. Examining the employees of two Fortune 500 companies, researchers discovered that face-to-face interaction decreased approximately 70% following the adoption of open layouts. Meanwhile, e-mail use increased 22% to 50%. Fifteen days before the office redesigns, participants averaged approximately 5.8 hours of face-to-face contact. After the switch to an open-office layout, participants’ face-to-face contact dropped to approximately 1.7 hours on average. To make matters worse, executives reported, productivity (as defined by the metrics used by the firms’ internal performance-management systems) declined after the office-layout redesigns. Instead of increasing collaboration, it seems, open office layouts trigger a natural response to withdraw socially from colleagues due to a lack of privacy. Despite the study’s limited sample size, these results are compelling. 

This is the first study that empirically measures both face-to-face and electronic contact before and after a company’s adoption of open-office architecture. Co-working environments are relatively new; and as time moves on, more research will emerge on their feasibility.

What is your take on open architecture in the workplace? 

(Dominic Perkovic is an Associate based in Avison Young’s New York office. He specializes in office real estate advisory and transaction services.)

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