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Has America Hit Peak Office?


Office space has historically reflected the health of the American economy, but new construction hasn’t recovered to pre-2008 levels. That has Joel Kotkin wondering: have we hit “peak office” in America? Kotkin writes for Forbes:

[T]he trend in real estate remains to convert office spaces to other uses, particularly residential. Large-scale office construction is happening in just a handful of markets; New York and Houston are the only ones with 10 million square feet being built, with smaller amounts in the works in Boston, Washington, Dallas-Ft. Worth and the San Francisco Bay Area.

What explains this slow-down in office construction? Kotkin suggests that the nature of America’s recent economic recovery, in which many of the jobs added were low-wage and part-time, lowered demand for office space. But he goes on to identify a more convincing explanation—telework:

Working at home is growing far faster than commuting by either car or transit, and in most U.S. metro areas, far exceeds those who get to work by public conveyance, most often to downtown areas. Over the past decade the number of U.S. telecommuters expanded 41% to some 1.7 million, almost double the much-ballyhooed increase of 900,000 transit riders.

This reflects a major change in the way the economy works, and it’s something we can expect more of in the near future. Growth will come with fewer office towers, fewer highway expansions, and fewer commutes as we transition from an industrial economy to one built on the manipulation of information.

[Telecommuting image courtesy of Shutterstock]

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  • Jacksonian_Libertarian

    I have a different reason, we are in the midst of Great Depression 2.0 (5 years and counting), where wages are falling, foreclosures are high, interest rates are low, but no one wants to borrow money because they are having such a hard time paying for the debt they already have.

    What gets you out of a destructive deflationary depression? Inflation

    The Fed should be ordered to pay off the $5+ Trillion in foreign bank held Treasuries, that they accumulated from their currency manipulations to give their exporters a price advantage. This would devalue the US Dollar outside the US, reducing US imports and giving US exporters a price advantage for the first time in many decades. US companies would repatriate many billions into the now growing US economy, foreign investment in the US would skyrocket as both the weaker dollar and cheap energy from shale oil development makes the US the low cost producer. US producers would grab huge portions of market share in entire industries, and the trade deficit which drags down GDP by -3% a year would add that much or more for a +6% a year swing in growth on top of whatever foreign investment, repatriated money, and restored normal growth, generate. Growth rates in the US might achieve 10% or more for a few years, before the liquidity is reabsorbed, and our foreign trade partners would be chastised for their currency manipulations, and US exporters would retain the acquired world market shares for many years thereafter.

  • Andrew Allison

    Could it instead be a result of falling demand for the humans who used to occupy offices?

  • JDogg Snook

    “This reflects a major change in the way the economy works, and it’s something we can expect more of in the near future.”

    You should measure new office space + new Starbucks. After all, just give a kid a paycheck, a laptop and ssh keys and (s)he’s ready to go. Face-to-face time is still important, so build places for folks to meet in NYC, etc for the day (conf room, workspaces, gym, spa, coffee, food) and that’s all that’s necessary.

    • William David Davenport

      ….as we transition from an industrial economy to one built on the manipulation of information.

      “Post industrial economy”? That is wrong, baloney, stale excuse-making for America’s industrial decline.

      Manufacturing is not in decline. Instead, more and more of it is being done outside the USA.

      What may be peaking out is the number of digital paper-shuffling office jobs the American economy can support. This is particularly true of gooberment office jobs.

      • JDogg Snook

        “Manufacturing is not in decline.”

        Are we sure about this? Has industrial output in the US actually decreased? Or have the related number of jobs just decreased? Also — manufacturing jobs are becoming information jobs, rather than someone sitting tightening a bolt, someone will be programming a computer to tighten a bolt.

        True enough about the paper-shuffling jobs, I think we really saw these blown away in the recession, which are the times when companies finally say, “ok, enough, we can’t do things the same way as we’ve been doing them”.

  • Kevin

    Telework is in many ways ideally suited to moving towards part time and lower wage employment. When employees don’t have to commute then part time is more attractive to them too. Telework is also attractive as a way to turn employees into independent contractors, reducing benefits and the need for employers to pay Social Security and Medicare and benefits too. (I’m pretty sure Obamacare will not require employers to pay health insurance for independent contractors.). Whether this will be such a great boon for employees is another question.

    • William David Davenport

      Are we sure about this? Has industrial output in the US actually decreased?

      Decades ago, most American consumer goodds, from cars to toys, from computers to shoes and clothing, were made in USA. Nowadays most consumer goods are imported. The thing speaks for itself.

      … Or have the related number of jobs just decreased?

      Yes, automation means that a smaller and smaller headcount of humans will be needed to produce more. I don’t know what formerly prosperous blue collar or middle class people will do for a job in the future. Bringing more manufacturing back to the USA will help.

      Also — manufacturing jobs are becoming information jobs, rather than someone sitting tightening a bolt, someone will be programming a computer to tighten a bolt.

      Writing software to automate bolt tightening is obviously part of the manufacturing sector. You’re just trying to aggrandize manufacturing to the information technology sector.

      My main point is that office jobs are also vulnerable to automation and outsourcing. And no, I don’t think that lots and lots of Americans are going to create lots and lots of jobs by starting up another Internet business. That reminds me of G. Bush Jr.’s enthusing in one of his State of the Union addresses that more and more Americans were working from home by selling stuff on eBay. Big deal. Reminded me of peepul in the former USSR trying to peddle their household goods on sidewalk push carts.

      In a business sense, I suspect that the Internet is approaching maturity. Google and Amazon and yes, eBay, have staked out most of the commercial space.

      America’s fastest growing job sector at present, aside from gooberment jobs, is the oil and natural gas extraction sector. Oil and natural gas extraction and processing … not particularly Internet-y or office or work from home oriented.

  • MichaelKennedy

    Especially telecommuting from Singapore.

  • TMLutas

    This is likely going to be a local peak as telecommuting is not likely to be a 100% proposition for most workers but rather an option among a range of options. Anything from 1 telecommute day per 5 work days to 4 telecommute days per 5 work days will lead to a local peak and eventual office space growth on a gentler incline. How local is the local peak, that’s going to be interesting to figure out.

  • John_Q_Galt

    I did telecommuting for a couple of years when I was in a 2- man satellite office where the other guy traveled a lot.

    I found that I can be very productive….though there is definitely value to in-office camaeraderie and the ability to drop by someone’s office and chat.

  • docscience

    Offices, mostly for sales, lawyers, distributors, agents, etc, seldom create wealth, most merely apply tolls and handle money.

    And this is the root of America’s problem.

    We need wealth creation, particular wealth from exports which bring our money back from abroad. Not another insurance call center.

    • Tom Billings

      Much of our balance of payments, such as it is, depends on service industries, such as banking, already. Wealth creation comes in many guises. That we are having trouble seeing what people can do to make wealth stems mostly from listening to institutions telling us that *they* are the gateway to automatic wealth. This model is collapsing, and we do not yet have anything to replace it.

      The wealth of industrial society (And no, we are *not* “post-industrial”, because a competent definition of industry has little to do with factories and other “hunks of stuff”.) depends on networks moving wealth around the world to get people to help multiply that wealth. If we want to see a higher percentage of people employed, we must:

      1.) Let them know they *can* fit into these networks.

      2.) Stop obstructing their access to such networks.

      3.) Stop taking away so much of the fruits of the real work needed in these networks to make wealth.

      Within 5 years we would have jobs for all who *can* fit in. The rest would need either niches shielded from the social demands of networks, or medical treatments to help them meet those demands. That last may take 20+ years, but is doable.

      • William David Davenport

        … depends on networks moving wealth around the world to get people to help multiply that wealth …

        Your “networks” –> banks?

        Is that an argument and apology for the big globalist banks?

        • William David Davenport

          “Hunks of stuff” — A parasitic finance capitalist’s attempt at denigrating producer capitalism?

          • Tom Billings

            No, …a libertarian’s recognition that the academic definition for “industrial revolution” switched from Arnold Toynbee’s to Fredrich Engels’ definition just when that would benefit “the socialist camp”. Academics could then claim to be advocating for a part of industrial society, instead of what the socialist camp was, …its strongest opponent. Engels was the man who said the “industrial revolution” consisted of steam engines, railroads, production lines, and other “hunks of stuff”. So a “socialist camp” that built factories and staffed them with government hierarchies that watched GOSPLAN for directions, instead of the world-wide markets, could still get the cache (till the ’60s) that they were a progression of the industrial revolution, instead of reactionaries against it. Toynbee’s definition stopped short, but was at least headed in the right direction, in identifying markets as crucial. IMHO, markets are only one of *many* levels of networked action needed to create and sustain industrial society around the world.

            BTW, Banking is only one part of market networks, but performs crucial functions.

        • Tom Billings

          Nope! See reply below. IMHO, the hatred of “globalism” is just another way to hate industrial society, which is world-wide, or it cannot exist at all. Industrial market networks *include* banks, but go far beyond them, though banking is a crucial function. Industrial society *includes* market networks, but also needs world-wide physical networks, political networks, intellectual networks, and even spiritual networks. Without any one of those levels of action, linked in highly productive world-wide networks, industrial society will stagnate into yet another agrarian culture oligarchy. Indeed, with the latest wave of attempts to get them “under control”, we see that stagnation being imposed bit by bit today.

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