Internet Destroying Office Property Demand

The IBM office park built in Westchester, NY during the 1980s is nearly empty. The team members from one particular IBM work group have never even met before… at least in person. Online, they meet everyday.

empty_cubicles

This isn’t some idealistic vision of a future work place, it’s modern day reality at one of America’s largest corporations. In the PBS Frontline documentary, Digital Nation, Francoise LeGoues, the VP of Innovation at IBM, estimates the savings from holding online meetings amounted to $1mm last year. The online world, Second Life, serves as a virtual office space for various working groups at IBM where they hold daily “sit downs”, gather to discuss strategy and map out the team’s mission ahead.

Are “Big Office” Companies Inefficient?

Technological advance continues to accelerate at break-neck pace while innovation constantly iterates old technologies, re-purposing them for greater efficiency. We all like real estate for different reasons, but the single constant benefit has always been real estate’s inelastic supply. While it’s (mostly) true that they aren’t making any more, it looks like they might start using less of it. This could have significant implications for commercial real estate owners if tenant’s employees start working from home. Clearly, some industries and types of commercial real estate are not as threatened by this trend. Don’t expect your dentist to be remotely cleaning your teeth any time soon and don’t expect Jeff Bezos to keep all that inventory in his backyard (although he probably could) rather than a warehouse. However, much of America’s service driven economy does not require a physical presence to complete their jobs.

Time Left on the Clock

time pieceThere are certainly obstacles to keep this from becoming the norm, so for the moment, the clock is still ticking. A valid concern for businesses considering a shift to a virtual work place is, can you effectively manage employees from a distance? There are good arguments on both sides of this issue, but as work places become more decentralized, certain skills (self-discipline) will become more valuable. Should the trend continue to gain momentum, demand for office space will also inevitably shrink at a faster rate. We can also be sure that the pace of such changes will certainly not let up as companies continue to look for ways to cut costs amidst a recession and greater competition from overseas.

It would be interesting to hear about other companies implementing remote office policies; especially the kinds of results they are getting. These days, we’re all on call 24/7 anyway, so really, what’s the difference?

Share your thoughts/questions/predictions/criticisms in the comments below.

NB. If you’re interesting in finding out more, as you might expect, you can find tons of extra info on the Digital Nation section of the PBS.org website. You can also watch the entire documentary.

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