Landmark Links May 26th – Backlash


Lead Story…. Office has been a challenging commercial asset class in which to invest in recent years.  Re-tenanting and maintenance costs are sky high, and market vacancies are often in the double digits even in a good market.  However, perhaps the most challenging aspect of investing in traditional office space (there are subsets like medical office that are different) is that average square footage per employee has been in long term decline.  According to the LA Times, businesses used to average a massive 500-700 sf per employee back in the 1970s.  Today, that footprint has sunk to a measly 151 sf per employee on average in North America.  It was 225 sf as recently as 2010.  It doesn’t take a genius to figure out how troubling this math is for an office landlord.

It turns out that a majority of companies in 2017 are trying to emulate a tech startup or Wall Street trading floor by going to open floor plans.  Call me skeptical or simply old fashion but I’ve always viewed this as more of a trend driven by economics (companies trying to save on rent by reducing space) than preference (workers actually wanting to get rid of walls and sit out in the open).  Don’t get me wrong, this statement isn’t meant to be once-size-fits-all.  In fact, I can see where open offices would be a net benefit in the aforementioned collaborative tech or finance spaces.  However, I don’t think they are for every industry.  I can’t imagine working without the semi-private space of an office or cube.  Then again, I’m a really loud talker and am on the phone a lot so my co-workers would probably want to gag me if we had an open floor plate at Landmark.

I’ve been waiting for push back against this trend for a while and was surprised that it had taken so long.  According to Vanessa Fuhrmans of the Wall Street Journal, that push back is now starting to come from management (emphasis mine):

Nearly 70% of U.S. office spaces are open-concept, according to the International Facility Management Association, compared with 64% two decades ago. Led by CEOs such as Michael Bloomberg, AB InBev NV’s Carlos Brito and Inc.’s Tony Hsieh, more executives have ditched the corner office for an open desk to project camaraderie with the masses.

But as employees and managers squeeze closer together, productivity and morale have suffered. In a review of more than 100 studies of work environments, British researchers found that despite improving communication in some instances, open-office spaces hurt workers’ motivation and ability to focus.

Employees seeking privacy resort to conference-room squatting or ducking into “focus” booths, quiet refuges that companies are increasingly building into open offices.

The result is that many bosses are now pushing for enclosed spaces rather than fully open floor plates or move back to private offices for senior management.  Performance studies are endorsing this approach.  Again, from the WSJ (emphasis mine):

“When you’re in a territory that’s clearly yours, you perform better,” says Sally Augustin, an environmental psychologist and principal at La Grange Park, Ill.-based consulting firm Design With Science.

Even watching a boss and co-worker move into a separate space for a meeting can be distracting, she adds.

“People’s minds never go to ‘Bob must be getting a promotion,’” she says. “It’s, ‘Bob must be in trouble. This is the beginning of the end for Bob.’”

I don’t think that there will ever be a full rollback of open office spaces.  They make up the vast majority of office space in North America, are generally more economical for tenants and are clearly here to stay.  However, most every trend goes a bit too far and it looks as if open space office layouts are finally poised for some push back from senior executives who want just a tiny bit more privacy.


Write It Down: It’s really difficult to find a scenario under which the Federal Reserve doesn’t raise interest rates in June.

Changing Tides: Goldman Sachs sees autonomous vehicles shifting job creation from retail and transportation to other sectors rather than causing mass unemployment. Contra: Heres why autonomous vehicles are a major global threat to employment.

A Better Mousetrap: Quant funds have grown rapidly in recent years and now dominate Wall Street, continuing to expand while traditional funds contract. See Also: Old school hedge funds are going quant primarily because nothing else seems to be working.

Fading Away: Between retail store closures and a growing emphasis from college admissions on extracurricular activities, teen summer jobs are going the way of the dodo.


Up in Smoke: Marijuana business owners stormed Capitol Hill last week to lobby Congress for access to the banking system.

Home Stretch: Amazon is considerably ahead of other retailers in terms of developing its own delivery network, but third-party logistics companies could be the next significant occupiers of smaller warehouse space.


Generational Battle: Baby Boomers and Millennials are increasingly competing for the same homes….and the wealthier Boomers are often winning.

Slim Pickins: Existing home sales were down 2.3%, continuing to reflect seemingly ever-declining inventory.


In the Dark: CalPERS is the nation’s largest pension fund.  However, they have no clue how much they are paying in private equity fees.

Sliding Scale: Uber is using data science to charge customers what it thinks they are willing to pay (think: people going to or from a rich neighborhood will pay more).  However, they are cutting drivers out of some of the upside which is sure to cause more issues for the embattled ride hailing app.

Too Much of a Good Thing: Maine has more lobsters than they know what to do with and that glut means that lobster fishermen aren’t making any money.

Chart of the Day

Divergence (h/t Tom Reimers)



Clever: An Ohio man was arrested after telling investigators that he was being extorted by a child porn website he visited for thousands of dollars.  Thank God for stupid criminals.

Lurking: A woman found a python wrapped up in a blanket while doing laundry, because Florida.  (h/t Steve Sims)

Money Well Spent: Meet the real estate executive who pleaded guilty to stealing $1.6MM from his company to pay for cocaine and strip club binges. (h/t Steve Sims)

Welcome to the Thunderdome: Two middle school teachers outside of Atlanta got into a full-on brawl in the classroom as students looked on.  Thanks to the magic of technology, the entire thing was caught on video.  Both have been arrested.  I really wish that school was this interested when I was a kid.

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