ABI July 2024: Firm billings decline at modestly slower pace / Companies Hope Making Offices Like Hotels Will Lure Workers Back / The Pandemic Is History, but for Architects, Its Impact on Office Design Remains / Office Demand is Growing But H2 Employment Concerns Loom / A Manhattan Office Tower Just Sold at a 97.5% Discount / Goldman Sachs Real Estate Head: U.S. Markets ‘Now Bottoming Out’ / Office Market May Be Nearing Bottom, Says Moody's / Almost 63% Of DFW Workers Have Returned To The Office, But Some Areas Fare Better Than Others / U.K. Pushes for Flexible Work and "Right to Disconnect" to Improve Workforce Productivity / How Flexible is The Future of Work? 25%, 50% or 100%? / How 'alonement' at work is creating spaces for the modern smoke break / and much more…


The Working Space
Monday, August 26, 2024

Industry News

In July 2024, architecture firms reported declining billings for the eighteenth consecutive month, although the pace of decline slowed. The ABI score was 48.2, indicating continued soft business conditions. Newly signed design contracts decreased for the fourth month, but inquiries for new projects increased. Employment in the architectural services industry rose to its highest level since August 2023, despite broader economic softness and a rising unemployment rate. Many firms noted longer design times, primarily due to permitting and zoning challenges, while some reported decreased design times driven by client urgency.
The architecture industry is facing an economic slowdown due to five interconnected factors: high interest rates discouraging project financing, inflated construction costs from material and labor shortages, rising inflation impacting operational expenses, a shift to remote work reducing demand for office space, and a general climate of instability and uncertainty affecting client investment decisions. These elements create a 'perfect storm' that suppresses demand for architectural services and complicates business operations.
Demand for office space has increased in the first half of 2024 but remains below pre-pandemic levels, with challenges from hybrid work models. While Miami and Manhattan lead in return-to-office rates, slowing employment growth in office-using sectors raises concerns. Sublease space is historically high, and overall availability in Central Business Districts has increased significantly. Leasing activity is below pre-pandemic levels, focusing on high-quality offices, while office construction is at a 10-year low. Office investment sales have dropped 59% from H1 2022 due to high capital costs, with distressed properties making up a significant portion of commercial real estate loans.
Goldman Sachs is shifting its strategy to invest in U.S. real estate markets, believing they are bottoming out after a period of offloading assets. The firm is focusing on sectors like housing, logistics, and healthcare, while also engaging in debt markets to capitalize on liquidity gaps. Factors such as peaking inflation and interest rates, along with signs of market recovery, have prompted this renewed investment approach, which aligns with long-term trends in technology, demographics, and sustainability.
Moody's reports that the office market may be nearing its bottom, indicated by an increase in transaction volume and recent sales at significant losses. After a period of declining transaction volume, there has been a positive shift, suggesting improved price discovery. Additionally, recent large transactions at substantial losses signal that the market may be stabilizing, although further declines are still possible in the near term.
The UK commercial property market is recovering faster than the rest of Europe, with a 1.4% increase in property values and a 7% rise in transaction volumes in the first half of 2024. However, the office sector remains sluggish, experiencing significant declines and marking its weakest performance since 2001. Demand is strong for warehouses, residential properties, and hotels, while traditional sectors like office and retail continue to struggle, leading to a "k-shaped" recovery where some properties rebound while others decline.
A Midtown Manhattan office tower sold at a 97.5% discount in an online auction, reflecting challenges in the office sector. Originally purchased for $332 million in 2006, the property highlights the current struggles in commercial real estate.
A Manhattan building has secured a $75 million loan to convert from an office to a multifamily space, part of the largest conversion project in NYC history. The redevelopment will transform the nine-story structure into a 29-story building with up to 660 units. Northwind Group provided the loan, emphasizing the project's potential amid NYC's housing shortage.
The delinquency rate for commercial mortgage-backed securities (CMBS) has surpassed 8% for the first time since November 2013, rising from 7.55% to 8.09% between June and July 2024. Multifamily delinquencies increased slightly, while retail and lodging delinquencies decreased. Special servicing rates also rose, particularly for office properties, indicating ongoing credit challenges in the market. Notable new delinquencies included significant loans in New York City and other locations, while some large loans in lodging and retail showed signs of recovery.

Workplace News

Companies are transforming office spaces into "work resorts" that mimic the comfort and luxury of boutique hotels to attract workers back, as seen in Springline, a complex in Menlo Park, California. With amenities like restaurants, outdoor workspaces, and community events, these spaces aim to provide a better experience than working from home. This trend, known as "hotelification," is gaining traction across various sectors, emphasizing the importance of creating beautiful and welcoming environments to enhance employee satisfaction and productivity.
The wellness real estate market is rapidly expanding, driven by increased emphasis on health and well-being, with an estimated value exceeding $580 billion in the U.S. This growth is evident across various sectors, including residential, workplace, hospitality, and retail, where wellness-focused design and amenities command significant revenue premiums. As consumer demand for holistic environments rises, real estate developments that integrate wellness principles are likely to outperform traditional properties and attract investment.
U.K. landlords project that over 54% of office space will be flexible by 2030, influenced by post-Covid trends and AI advancements. While current penetration is low, there is significant growth potential in the flexible workspace sector. The author revises their long-term estimate of flexible space from 25% to 30%, acknowledging the impact of remote work on future office needs, but remains skeptical about reaching the 54% average across all office spaces.
In the Dallas-Fort Worth area, 62.6% of workers have returned to the office, slightly above the national average of 61.9%. Central business districts and Uptown report over 90% return rates, while areas like Las Colinas lag at 52.2%. The return to office rates vary by location, influenced by commuting distances and the types of businesses present. Incremental increases in return rates are expected in the coming years, with many smaller businesses fully back in the office, while larger companies are downsizing office spaces.
The U.K. government, led by Prime Minister Sir Keir Starmer, is advocating for flexible work policies and a "right to disconnect" to combat presenteeism, which is seen as detrimental to productivity. This strategy aims to support remote work and ensure employees are not contacted outside of work hours, aligning with practices in countries like Belgium and France. The initiative is part of broader economic reforms aimed at enhancing work-life balance and meeting modern workforce demands.
Workers returning to offices are seeking "alonement" spaces for solitude, akin to modern smoke breaks, as they adjust from remote work to bustling environments. These spaces, designed for individual use, help promote mental well-being and cater to neurodiverse employees. Companies are increasingly incorporating such areas into their designs, recognizing the need for quiet retreats amidst chaotic office settings.
A CBRE survey reveals a significant gap between return-to-office policies and their enforcement, with 80% of organizations having a policy but only 17% enforcing it. While many employees prefer in-office work, only 51% meet employer expectations of three or more days in the office weekly. Companies are shifting towards expansion and technology adoption, with 38% expecting to increase portfolio requirements and 40% deploying advanced technologies to improve operations. The office market shows signs of stabilization as visits approach pre-pandemic levels.
To enhance productivity in hybrid workplaces, organizations should reduce the "coordination tax" by implementing smart building technologies and workplace experience apps. These tools help employees navigate workspace availability and scheduling, addressing frustrations related to returning to the office. As younger generations prioritize work-life balance and collaboration, optimizing the physical workspace is essential for fostering effective teamwork and employee satisfaction.

Trends

The evolution of lab operations emphasizes the importance of natural light, mental health, and adaptability in lab design. Key trends include the need for better communication, privacy, and technology integration, with a focus on accommodating diverse workforce needs. Future lab designs should prioritize flexibility, collaboration, and efficient operational flow to enhance productivity and innovation.

Design

Designing for neurodiversity is essential for creating inclusive environments that enhance productivity and well-being. By understanding the unique sensory needs of neurodiverse individuals, designers can implement strategies that address sensory overload and promote comfort. Key considerations include optimizing visual elements, managing auditory stimuli, and ensuring tactile comfort. Organizations should engage neurodiverse employees in the design process and conduct regular sensory audits to continuously improve inclusivity. Emphasizing neurodiversity in design not only supports diverse cognitive needs but also fosters innovation and employee retention.

Interview

Gensler's interview discusses the integration of artificial intelligence (AI) in design and architecture, highlighting its role in enhancing the design process and developing digital twins for buildings. The conversation also addresses the concept of New Work, emphasizing the need for office environments to adapt to changing work dynamics post-pandemic. Key trends include a focus on experience in workspace design, sustainability, and biophilic elements. Despite the rise of remote work, the design of office spaces has seen little change, impacting employee preferences for working from home.

Podcasts

Allsteel's podcast "Tell Me More" continues its second season with an episode titled "Living in Beta: The Flexibility of Demountable Walls," featuring discussions on how demountable walls adapt to workplace needs. The episode highlights the benefits of a kit-of-parts design strategy, including versatility, user experience enhancement, time savings, and cost-effectiveness compared to traditional construction. Listeners can expect expert insights on innovative workplace solutions that boost productivity and collaboration, available on Apple Podcast and Spotify. Learn more >

Green / Sustainability

Now Available: Refreshed Freedom Task Chair by Humanscale
The Refreshed Freedom Task Chair by Humanscale promotes sustainability by refurbishing previously owned chairs with new components, extending their lifecycle and reducing waste. Designed for durability and simplicity, it features fewer parts than typical task chairs, ensuring ease of maintenance. The chair offers ergonomic support and comfort for various environments, backed by a 5-year warranty.
Climate adaptation is essential for businesses to survive in the face of climate change, with every dollar invested yielding a $4 return. Companies are shifting from reactive to proactive strategies, recognizing the risks of inaction across various sectors. Key actions include managing risks, making operational adjustments, adapting supply chains, monitoring progress, and providing leadership. Despite the challenges in securing funding for preventative measures, adaptation is framed as a common-sense investment in business continuity.
HNI Corp. has installed solar energy systems at two manufacturing plants, expecting to generate 2,500 MWh of solar power and offset over 2,000 tons of CO2e annually. This initiative highlights HNI's commitment to environmental responsibility and sustainability, contributing to its recognition as one of 'America's Climate Leaders' for reducing greenhouse gas emissions and focusing on renewable energy.

Armadillo Re-Certifies as B Corp
Armadillo, an Australian rug brand, has recertified as a B Corp, achieving the highest score among rug brands and ranking in the top five of the furniture category. Founded in 2009, the brand is committed to sustainability, having achieved Carbon Neutral status in 2023, ensuring all rugs are free from harmful chemicals, and expanding its philanthropic efforts to support education for young women globally. Armadillo is recognized as one of the Best Places to Work in Australia and the US, continuing to blend luxury, craftsmanship, and sustainability.

Latest Product News

Fluidconcepts has launched Contour, an innovative workstation designed to enhance productivity and maximize space efficiency through organic shapes. The design reduces stress and distractions, allowing for a more collaborative atmosphere while fitting more employees into smaller spaces. Contour offers 224 customizable variations and emphasizes sustainability by planting a tree for each unit sold and promoting easy recycling.
 
"At Fluidconcepts, sustainability is more than a goal—it's a commitment," says Byron Leclair, President. "For every Contour unit sold, we plant a tree, contributing to reforestation efforts and a healthier planet. Additionally, Contour is designed for easy reconfiguration, disassembly, and recycling, supporting a lifecycle approach that minimizes environmental impact."
Knoll has reissued the Tugendhat Chair by Ludwig Mies van der Rohe, blending minimalist design with contemporary comfort. The chair features a cantilevered form, untufted seat, leather strap back, and thick cushions, allowing for movement and adaptability. Designed for Villa Tugendhat, a UNESCO World Heritage Site, the chair reflects a connection between architecture and nature. Customizable options are available, making it suitable for various interior settings. The chair is available for purchase through Knoll's website and certified dealers.
Calyx by Claridge offers printed gradient glassboards for dorm lounge areas, available in 40 standard color combinations or customizable to match college colors, enhancing functional art in student housing.
Fellowes has expanded its Sena and Rising product lines by introducing six new monitor arm configurations and two innovative laptop holders, enhancing workspace functionality and aesthetics. The new products, available in black, white, and silver, are Level 2 Certified, BIFMA Compliant, and backed by a Lifetime Warranty. They are designed for quick shipping and aim to meet the growing demand for versatile monitor solutions.
The Ganges Collection by Jamie Stern Carpet features beautiful, durable rugs made from natural fibers like New Zealand wool and bamboo silk, hand-loomed by artisans. This collection emphasizes sustainability and includes various textures, promoting unique character through handmade production. Custom sizes and colors are available.
Invi Air has launched the 1 Slot Square Diffuser, a frameless and innovative air diffuser that integrates seamlessly with ceilings for a modern look. Made from a proprietary composite material, it minimizes condensation and is designed for both supply and return use, offering unlimited customization and compliance with ASTM E 84 Class A and CARB Phase II standards.

Industrial Design

Grovemade's standing desk stands out with a full-width, compartmentalized drawer designed for functionality, featuring a shallower front for small items and a deeper back for larger ones. The drawer is ventilated for laptop storage, lined with cork and Merino wool, and includes invisible cable management with easy access to a built-in surge protector and USB ports. The desk is available in solid wood or plywood veneer, priced at $2,900 and $2,200 respectively.
Fixmotion has developed self-stabilizing outdoor tables that automatically adjust to uneven surfaces without requiring user intervention. The tables can accommodate a vertical difference of up to 5cm and feature four designs with vertically folding tabletops for easy storage. The design is self-stabilizing rather than self-leveling, which would involve more complexity.

Trends in Commercial Projects from Around the Globe

The Haas Jr. Foundation Headquarters in San Francisco, designed by TEF Design, emphasizes well-being, collaboration, and transparency in its 7,900 sq ft renovation. Key features include open collaboration spaces, a community kitchen with views, and a design inspired by the California landscape, utilizing natural materials and promoting inclusivity. The project involved extensive staff engagement to align the workspace with the Foundation's mission of community and advocacy.
The GYOPO office in Koreatown underwent a renter-friendly revamp led by designer Grace Lee-Lim, focusing on budget-conscious, impactful changes without structural alterations. Key updates included removing old carpet, repainting walls and ceilings, and incorporating elements that honor Korean heritage, such as Jogakbo drapery. The design emphasizes community needs, with flexible furniture and vibrant colors to create an inviting atmosphere for various programs and events.
The renovation of the Li-Ning Group's office in Shenzhen focuses on integrating vibrant colors and local textures while addressing employee needs with minimal disruption. The project, managed by PCJK and designed by Shapers, updates the interior of a well-located, 15-year-old building to better align with contemporary requirements and the brand's youthful culture.

Latest In Real Life WFH

Marcel Mroczek, a Polish student and content creator, shares his workspace transformation on Instagram, showcasing his passion for desk setups and tech gadgets. His workspace includes items like an IKEA Bekant desk, Acer Swift 3 laptop, and a Xiaomi Monitor Light Bar, which he considers essential due to limited natural light. He sparks creativity by starting projects to build momentum and seeks inspiration from other creators online.

Upcoming Industry Events

Orgatec 2024
October 22-26, 2024 | Cologne, Germany

Orgatec is the International trade fair for office and property equipment. Held in Cologne, Germany.

THE LATEST: ORGATEC 2024: taking the office of the future into new dimensions
ORGATEC 2024, taking place from October 22 to 25, will showcase the future of work with a focus on the #InspiredAugmentedOffice area, featuring augmented reality experiences and integrated office landscapes. The event will highlight trends in collaboration, smart work, and spatial computing, allowing visitors to engage with modern technologies through the zintoo: app for enhanced interaction. This trade fair aims to redefine office design and address the evolving needs of hybrid work environments.

NeoCon 2025 / DesignDays 2025
June 9-11, 2025 | Chicago, IL
 
NeoCon has served as the world’s leading platform and most important event of the year for the commercial design industry since 1969. A launch pad for innovation—NeoCon offers ideas and introductions that shape the built environment today and into the future.  Joining at the same time, in Fulton Market is DesignDays, a compatible show that now hosts more than half of the largest office furniture manufacturers. Hint: See both.

Industry Briefing

Artcobell Names Alicia Springer Marketing Communications Manager
Alicia Springer has been promoted to Marketing Communications Manager at Artcobell, bringing over 10 years of experience as a Senior Graphic Designer. In her new role, she will oversee all external marketing initiatives and support business development efforts. Springer expressed excitement about her new position and aims to enhance Artcobell's marketing and communication strategies.

Multidisciplinary Studio //3877 Expands Team; Hires Two New Interior Designers
//3877 has expanded its team by hiring interior designers Sam Painter and Kelsey Wylie to enhance its interiors portfolio. Both designers bring valuable experience and a fresh perspective, with a focus on hospitality projects. The firm aims to foster innovation and growth by investing in emerging talent while continuing to adapt to the evolving needs of the design industry.
“Designing for the Senses” by Joscelin Mackey explores the connection between interior design and neuroscience, emphasizing how environments influence mental and emotional well-being. The book discusses the impact of design elements like color, lighting, and sound on individuals, particularly those with neurological disorders. It offers practical insights for various professionals to create sensory-friendly spaces that enhance well-being, advocating for a holistic approach that integrates sustainability and individual health.

Configura to Host Upcoming CET Experience
Configura will host the CET Experience from October 7-9, 2024, in Grand Rapids, MI, featuring keynote speaker Shawn Kanungo and sessions led by industry leaders. The event aims to foster community engagement, share insights, and promote growth within the commercial interiors sector. Participants can register until September 27, and the Configura Awards will honor innovative uses of CET, with submissions closing on August 26.

Spacesaver Intermountain Expands Specialty Storage Footprint
Spacesaver Intermountain is expanding into Colorado and Eastern Wyoming, enhancing its position as the largest specialty storage leader in the Intermountain West and exclusive dealer of Spacesaver Corporation. The company provides innovative storage solutions, including shelving and mobile systems, aimed at maximizing space and improving organization. Their commitment to excellence and tailored solutions has established them as a trusted partner across various industries.

Lighting Environments, Elevated™, and Environments Announce Inaugural 'ArchiTech Summit'
The inaugural ArchiTech Summit will be held on September 26, 2024, in Washington, D.C., focusing on innovation in architecture, technology, and design. The event will feature educational tracks for contractors, owners, and specifiers, with sessions led by industry experts. Attendees can explore the Elevated™ app, which integrates IoT and AI for improved building management. Early registration is encouraged due to limited space.
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