Categories Economy, Narrative

How Much You Need to Make to Buy a Home

While we specialize in leasing commercial office space, we watch the housing market very closely. Housing is a precursor to office space growth. Regular readers know this housing market recovery has been slow and multifamily has been on fire for the past 5-6 years. While there are lots of reasons for this, affordability may be one of them.  

The below infographic shows the average salary needed to buy a home in 27 US cities. Some takeaways: 

-Phoenix sits comfortably at $43,938—still not cheap.
-Larger cities, like New York City and Los Angeles, require nearly $100,000.  
-San Francisco sits at the top, requiring employees to earn a whopping $147,996.  This is one reason why we are seeing a ton of companies grow or expand to Phoenix from the Bay area. 

Why is this important? It has a huge effect on companies’ decision on where to locate. Over the long haul, millennials will want to own their homes.  Access to affordable housing should be on every decision maker’s checklist when they look for office space. 

Craig
602.954.3762
ccoppola@leearizona.com

PS Below is a link to a video featuring the #1 Shark at Lee & Associates. Need advice on your business from a shark? Give us a call. 

Meet the Sharks

Click here if you can’t view the video.


This infographic shows how much you need to make to buy a home in 27 US cities

Business Insider
Jeff DesjardinsVisual Capitalist
Apr. 5, 2016, 3:13 PM
Visual Capitalist
Photo 1
Courtesy of: Visual Capitalist
Click here to enlarge the picture.

The popping of the Greenspan-era housing bubble took about six years in total to fully “deflate”.

Most U.S. housing markets peaked sometime in 2006, and it wouldn’t be until just before the third-round of quantitative easing in 2012 that this fall would finally be cushioned. Since then, the combination of QE and record-low interest rates have helped re-inflate the housing market. For better or worse, real estate in many U.S. cities are now approaching or passing their 2006 housing highs, but with a growing disparity between individual metropolitan areas.

Today’s 3D map comes to us from HowMuch.net, and it shows the very different salaries needed to buy a median home in 27 different U.S. metropolitan areas. The salaries range between $31,134 to $147,996, which is a discrepancy of over $100,000.

At the low end of the spectrum, it takes a salary of between $30,000 to $40,000 to buy a home in most metropolitan areas in the Midwest. In St. Louis, for example, the salary needed to buy a home is $34,778. Pittsburgh was the least expensive city analyzed, where a salary of $31,135 could buy the median house in the city.

At the high end is any metropolitan area in California, for which closer to six figures is now needed. San Francisco has the most expensive housing in the country, where residents must make $147,996 a year to be an average homeowner. However, Southern California is not far behind the Bay Area, where salaries of $95,040 and $103,165 are required to buy in Los Angeles and San Diego respectively.

See the full data set, including mortgage rates, monthly payments, and median house prices here.

West Coast envy

Which cities have rebounded the most since the popping of the housing bubble?

According to The Economist’s interactive chart on U.S. housing price indices, the average U.S. market recovery between 2006 peak and 2012 trough has been about 63.9%.

The Eastern half of the country has struggled to rebound to 2006 housing highs, with New York City, Baltimore, Philadelphia, Chicago, Tampa, Miami, and St. Louis all recovering below the above average mark.

In contrast, prices in the West are soaring: San Francisco, Houston, Dallas, Denver, and Portland have all met or exceeded their 2006 highs. Meanwhile, Los Angeles, Seattle, and San Diego have recovered better than average.

Read the original article on Visual Capitalist. Get rich, visual content on business and investing for free at the Visual Capitalist website, or follow Visual Capitalist on Twitter,Facebook, or LinkedIn for the latest. Copyright 2016. Follow Visual Capitalist on Twitter.

 

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Categories Uncategorized

Why Use a Broker?

Our team handles 50+ tenant advisory assignments every year. Why? We like to think it is because we are really good. But there are many other reasons to hire a broker including:

  1. Researching and looking into office space takes up a large amount of time. Do you have the luxury of stepping away from your immediate job responsibilities for an extended period of time? Most don’t.
  2. Wouldn’t it be nice to have landlords fighting over your business? Good tenant reps make this happen.
  3. Not only do we ensure that you save money in negotiations, our services are free. The Landlord pays the commission.
  4. These relationships aren’t fleeting. Having a long-term business relationship with an incredible tenant rep like Coppola-Cheney will aid in all future real estate endeavors for your company.

Below are two articles that spell out some other reasons to hire a team like ours. 
 
We also put together a 3 minute video that showcases why we are the best at what we do. Give us a call if you would like to learn more about how our tenant representation services can help your business. 

Ink Man
If you are unable to play the video, please click here.

Craig
602.954.3762
ccoppola@leearizona.com


Why should a business owner use a Commercial Tenant Representation Broker to help them locate & negotiate commercial space?

Why should a business owner use a Commercial Tenant Representation Broker to help them locate & negotiate commercial space?

Answer: We do not know if you are currently under a commercial lease agreement or your experience with analyzing and negotiating commercial leases, which may affect your decision; however, you can review industry articles and suggestions on Commercial Tenant Representation Broker services at several websites, which include these common considerations:

Reasons why you may need tenant representation:

1. Do you have the time and expertise to research the real estate market, including opportunities that are currently available or will become available in the future?
2. Do you know the effective leasing rates and inducements being offered to those leveraging their real estate requirement?
3. Do you have the time and expertise to deal with brokers and landlords in a site search, while at the same time handling all of your other job responsibilities?
4. Do you know how to use real estate to improve the financial and competitive position of your business or corporation?
5. Do you know that the quoted rental rate of your building includes brokerage fees?

Ways a tenant representative can help:

1. Analyze space needs
2. Investigate all available properties and determine which are the most appropriate for your needs
3. Create a bidding war among several landlords for your business
4. Protect you during lease negotiations so that you come away with terms that meet your present and potential needs
5. Serve as a buffer between you and the landlord
6. Identify lease provisions that could cost you money during the lease term
7. Handle the paperwork and other details of the lease negotiation
8. Settle disputes that arise after the lease is signed


10 reasons working with an office tenant rep is better than flying solo

October 09, 2014 | Staff Writer
RE Journals

Finding and leasing office space presents challenges for any business, but it can be especially difficult for companies that lack the knowledge and expertise to make an informed decision about their real estate needs. While researching different buildings and neighborhoods is often a good place to start, working with an experienced broker who’s already familiar with the options that exist in the market not only saves time and money, but also ensures businesses end up in a location that will work for them over the long term.

“Just like attorneys and medical professionals, commercial brokers have specialized knowledge that can prove invaluable during an office search,” said Frank Chalupa, president of Amata Office Solutions, a Chicago-based real estate company that specializes in office solutions for companies requiring up to 10,000 square feet of space. “By handling the majority of the legwork, brokers are able to streamline the search process while generating better results for their clients.”
According to Amata, the top 10 benefits of working with an experienced tenant rep are:

1) Their services are free: A common misconception is that the benefits of working with a commercial broker are offset by the cost. “What some businesses don’t realize is that tenants are not responsible for paying brokers for their services,” said Chalupa. “Instead, these costs are covered by the landlord, with the tenant rep splitting the commission with the listing agent.”

2) They can help businesses determine what goes in the cloud and what stays in the office: Cloud-based file storage and other technologies have enabled businesses of all sizes to cut costs by reducing their overall footprint. “A broker can assess a company’s needs to give them a more approximate idea of how much physical space they require to operate efficiently yet comfortably,” said Chalupa. “They can also help clients plan for growth to ensure they aren’t paying for space they won’t use.”

3) They’re connected: By taking advantage of their relationships with fellow brokers, building owners and other real estate professionals, tenant reps can educate clients about the best options in the market, including recently vacated spaces that are not yet publicly listed. “The improving economy, along with a lack of new office development, has caused demand for existing space to soar,” said Chalupa. “Today, available spaces are filling up before some companies even have the chance to look at them, making it all the more important to work with brokers who have their finger on the pulse of the market and can make clients aware of new spaces as soon as they come online.”

4) They save valuable time: Finding office space and negotiating a lease is a time-consuming process that can pull business owners and corporate decision makers away from the day-to-day operations of their business. “For many tenants, time is money, especially in the case of small businesses that simply do not have the resources to conduct a thorough office search,” said Chalupa. “In addition to money saved through the lease negotiation process, brokers also save their clients valuable time by handling much of the back-and-forth communications with the landlord leading up to the actual signing of the lease.”

5) They know how to find the needle in the haystack: Experienced tenant reps are well-versed in the local real estate market and have the keen ability to match companies’ needs to a specific location. If, for example, a startup is looking for a smaller space to expand their operations, they can benefit from working with a broker who specializes in spaces smaller than 10,000 square feet. “An office search can be overwhelming, especially for businesses that are going through the process for the first time,” said Chalupa. “By drawing on their familiarity with different buildings, as well as the people who own and manage them, tenant reps help clients identify the space that will best meet their current and future needs.”

6) They think about auxiliary items: While the look and feel of an office is important, there are several other factors that tenants should consider before signing on the dotted line. “Access to public transportation, parking and building amenities are just a few of the things that businesses should evaluate when leasing office space,” said Chalupa. “A good broker will help clients identify certain wants and needs that they might not think about if they were leasing space on their own.”

7) They give tenants more leasing power at the negotiating table: As with a job interview or presentation, it’s important that tenants come to the negotiating table prepared. “Brokers are the key to unlocking value during a negotiation, whether it be through lower rents, higher tenant improvement allowances or some other concession,” said Chalupa. “Most landlords have been through the negotiation process countless times before, so tenants that go it alone are at a significant disadvantage.”

8) They know the ins and outs of leasing: Leasing agreements are full of clauses and provisions that, together, dictate how much flexibility tenants have over the course of their lease. “Everything from rent escalations to the ability to sublease is spelled out in this document,” said Chalupa. “Because most tenants are eager to move into their new space, they may not stop to examine their lease as carefully as they should. A broker will ensure the leasing agreement reflects prior communications with the landlord and may even be able to recommend a real estate attorney who can review the lease before it’s signed by the tenant.”

9) They can act as your first line of defense if issues arise with your landlord: Even the most thorough of office searches can fail to identify problem landlords that can end up causing big headaches for tenants. “By acting as the messenger, a tenant rep can help resolve landlord-tenant disputes and save clients from awkward exchanges with their landlord,” said Chalupa. “If the problem cannot be resolved, brokers can help tenants evaluate their options and, in some cases, find a new home.”

10) They can help clients renew or relocate when their initial term is up: Although brokers often help clients with their immediate needs, their relationship can last years or even decades. “Tenants that maintain a relationship with their broker have a head start when it comes time to renew their lease or move to another location,” said Chalupa. “Brokers spend a lot of time getting to know their clients, so they’re familiar with a company’s needs.”

Tags | amata white paper, Commercial Real Estate
© 2016 Real Estate Communications Group. Duplication or reproduction of this article not permitted without authorization from the Real Estate Publishing Group. For information on reprint or electronic pdf of this article contact Mark Menzies at 312-644-4610 or menzies@rejournals.com- See more at: http://www.rejournals.com/2014/10/09/10-reasons-working-with-an-office-tenant-rep-is-better-than-flying-solo/#sthash.YObTIl2z.dpuf

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Categories Narrative

49% Of All Renters Are Cost Burdened

I follow housing trends. I used to follow homebuilding, but now I follow housing. It’s a little like saying I used to follow Global Warming but now I follow Climate Change. Here’s why—Millennials. Today there are 9 million more renters than just a decade ago. That is a ton, but what really caught my eye was that 1 in 5 of the 43 million renters are now paying more than 30% of their income on rent alone. Some pay 50%. If you read the graph below you will also find out:
 
–49% of all renters are cost-burdened—they pay more than 30% of their income on rent.
–Home ownership is at its lowest rate in 50 years.
–Demand for 
apartments is still ahead of supply.

 
What are my takeaways?

–This is unsustainable.
–More supply of affordable apartments.
–Home ownership will make a comeback.
–And people want to live close to where they work.

Craig
602.954.3762
ccoppola@leearizona.com

 P.S.- How do you handle rejection? We discuss this concept with Michael Kosta in this week’s video. Our motto? Fail Forward. Click here to watch now.

Runner Pt. 2
If you are unable to view the video, please click here.


Housing’s New Crisis: Half your income for rent

By Diana Olick
CNBC
December 9, 2015 12:50 PM

Getty Images. 
Housing Crisis
A quarter of all renters, or 11.4 million people, now pay half their incomes on those monthly bills, according to a new study.

There are now 9 million more renters than there were just a decade ago, the biggest jump in renters on record, and they are paying more for rent than ever before.

Of the nation’s now 43 million families and individuals who rent, 1 in 5 are considered “cost-burdened,” or paying more than 30 percent of their incomes on rent, according to a new study by the Harvard Joint Center for Housing Studies. Others pay half their incomes.

“The crisis in the number of renters paying excessive amounts of their income for housing continues, because the market has been unable to meet the need for housing that is within the financial reach of many families and individuals with lower incomes. These affordability challenges also are increasingly afflicting moderate-income households,” said Chris Herbert, managing director of the center.

Adding to the crisis, the number of “severely” cost-burdened renters, those paying more than half their incomes on rent, went from 7.5 million to 11.4 million in the last decade. This, as renter incomes have declined 9 percent since 2001. Add it up, and 49 percent of renters are cost-burdened, 26 percent severely so. 

Demand has clearly outstripped supply, despite a recent boom in apartment construction and a 35 percent jump in the number of single-family rental homes since the housing crash. Multifamily apartment starts are up.

“Record-setting demand for rental housing due to demographic trends, the residual consequences of the foreclosure crisis and an increased appreciation of the benefits of being a renter has led to strong growth in the supply of rental housing over the past decade both through new construction and the conversion of formerly owner-occupied homes to rentals,” said Herbert.

But it is not enough. Rental occupancy is at the highest level in 30 years, and monthly rent rates are at record highs — and still rising at a sizable 3.5 percent annually. While there is a wide swath of single-family rental homes and smaller multifamily buildings in the suburbs, much of the recent multifamily construction has been large, luxury buildings in urban centers. Upper-income renters are finding what they need, but low- to middle-income families are struggling.

Homeownership is now at the lowest level in half a century, and some expect it could go significantly lower. Household formation is expected to continue its slow rise, but almost entirely on renter households, not owner households.

“These market conditions will likely continue in 2016, as newly built apartments are absorbed by demand from new, young households. Look for rental vacancy rates to remain relatively low and rent growth to outpace inflation in 2016,” wrote Frank Nothaft, chief economist of CoreLogic, in a recent report.

Mortgage interest rates are expected to rise, and that will keep more renters who might have become homebuyers stuck in place. As rents continue to rise, renters will also be less able to save for a down payment on a home. 

“Title agents view first-time homebuyers as most impacted by a potential interest rate hike,” wrote Mark Fleming, chief economist of First American, in an analysis of rising rates. “Now that interest rates are pre-adjusting in response to signals from the Fed for a highly expected increase in December, demand is also declining.”

As more supply comes to market in large cities, rents are starting to moderate, but, again, that is in the higher end, luxury space. Some developers are starting to look to secondary markets and suburbs for new projects, since demand continues to be strong, but unlike the single-family construction market, the timeline for new product to reach the market in multifamily is several years out.

Housings New Crisis

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Categories Design, Narrative

Boosting Productivity in the Office

Workspace design continues to be a hot topic. Last week, I talked about the huge issues that come with open design that we are now discussing with all of our clients. Below my comments is an infographic on a survey that Cort Furniture compiled on workplace trends. I follow it up with a bonus article on how designers are trying to increase productivity as 81% of clients now use their offices as a workplace recruitment tool and 70% of offices now offer some type of flexible work hours for employees.

Here is a quick summary of all of my comments from the past two weeks:

  • The idea of “productivity” is evolving; collaboration techniques between employees and a more cohesive work environment seem to be the key to modern efficiency.
  • The need for privacy is not lost; it is still an integral part of today’s workplace. The idea is to have an alliance between quality group-work and necessary private time. Designers need to continue to work on this and noise disruptions in all environments.
  • In our health-conscious society, office trends now include variations of desks, conference rooms and meeting areas that accommodate both sitting and standing.

If you have any questions or concerns, we are here to navigate you though all the rapid changes occurring in our world. Give us a call.

Craig
602.954.3762
ccoppola@leearizona.com


P.S. We were proud to represent Ober & Pekas in their recent relocation to CopperPoint Tower at 3030 N. 3rd Street. 

Obers_Pekas_PostcardFINAL
For our one minute case studies, please click here.

CRTCOR15056_Workplace_Infographic_R22 (1)

WORKSPACE DESIGN TRENDS TO INCREASE YOUR PRODUCTIVITY

YOUR OFFICE NEEDS MORE NOOKS, LESS SITTING. GIVE YOUR EMPLOYEES A SPACE THEY LOOK FORWARD TO COMING TO.

Jul 9, 2014
download
BY VIVIAN GIANG

PRODUCTIVITY TRENDS
[Image: Flickr user 準建築人手札網站 Forgemind ArchiMedia]

Creating paths for chance meetings, including nooks, and designing agile, unique workspaces are solutions that designers say promote collaboration, creativity, and productivity in the modern office.

“In the last four to five years, we’ve all been focusing on sustainability and the impact technology has in an office,” says Kay Sargent, director of workplace strategies at infrastructure solutions provider Lend Lease. “During this time, we’ve forgotten that we’re designing for people. Now there’s a real focus on trying to maximize human potential, performance, and productivity.”

But what is productivity? It’s no longer about sitting at your desk with your head down working all day.

“I think of [productivity] as effectively creating ideas and solving problems and a lot of that has to do with being collaborative,” says Miguel McKelvey, cofounder and chief creative officer of coworking office space WeWork.

To help employees come up with their next great idea, McKelvey and Sargent provide the most current trends in workspace designs:

CREATE PATHS FOR CHANCE MEETINGS
In the past, people used to have to sit at their desks if they needed to answer emails, but today, anyone can do that—or any other work—from anywhere. This means that, from a creative perspective, it’s no longer necessary to make sure people are at their desks at all time.

“It’s more crucial to make sure people are connecting and brainstorming with each other,” says McKelvey, who leads design and architecture at WeWork.

“We’re very specific when we’re drawing work plans. We think about the chances of when a person gets off the elevator where they will go,” he says. “We think about how people get to a coffee machine, when they go and get their lunch, when they go to the bathroom.”

The chance encounters are necessary to increase familiarity and to hopefully create conversations that lead to solutions.

Sargent, former vice president of architecture and design at furniture manufacturer Teknion, says there is a popularity now for designs that help people move.

“There’s a huge movement now to design for human potential … for intellectual and emotional intelligence,” she says. “We see staircases are now designed to be in the center of offices and not in the back as exits.” This is because designers have realized that there are several chance encounters that could happen as people pass one another on stairs, simply going to and from their desks.

INCLUDE NOOKS NEAR COMMON AREAS
The best-case scenario when people run into each other is that brilliant conversations spark, resulting in innovative solutions. This is exactly why you should include nooks—areas where people can go and maintain some privacy—around these common areas and paths.

“When you start a conversation when you’re at the coffee machine, you can quickly sit down after and have a 20-minute meeting,” says McKelvey. “If you have to reserve a conference room to finish that conversation, then you lose time. It’s not efficient.”

McKelvey advises to put these nooks adjacent to social places, such as areas for eating, coffee, or printing.

BUILD CONFERENCE ROOMS DIRECTLY IN COMMON AREAS
Instead of the boring walls that usually put people to sleep, glass walls in the middle of a busy area can help keep the mind awake.

YOU CAN’T CONTROL ALL DISTRACTIONS, BUT YOU CAN GET UP AND MOVE.
“Your mind is being spiked by the activity that’s swirling around,” says McKelvey. The downside is that this could be a problem for people who have issues concentrating.

INCLUDE BOOTHS FOR PRIVATE CONVERSATIONS
With the popularity of open floor plans, “it’s certainly important for people to have a sense of privacy,” says McKelvey. “People need a space that they can go to make a conference or Skype call.”

“It’s important to create those spaces and create a company culture that supports those spaces.” In other words, you don’t want to have a culture where the boss is always asking why someone isn’t at their desk.

People need to feel like they can go to a private area for a phone call or simply to work uninterrupted if they need to.

CREATE AN AGILE WORKSPACE
“We’re designing spaces today where every employee doesn’t have to sit in a specific spot,” says Sargent. “Rather than going to sit in one desk all day, it could be that I’ll start working at a bench, then I’ll go to a more quiet space for head-down concentration, then I’ll go to the social hub because I want to connect with my co-workers. We’ve moved beyond traditional offices to agile design.”

Sargent says agile designs make more sense because it feels more comfortable for employees. If you have a house, you go to the space designed for the task at hand instead of having to sit in one spot all day. This increases your movement, and creates an agile environment where people have choices, more control, and power.

“We still need to conquer how to control distractions. You can’t control all distractions, but you can get up and move.”

HAVE ADJUSTABLE DESKS AND CONFERENCE TABLES
Research shows that sitting too much is harmful to our health and employers should be concerned about the health of their biggest asset: their employees.

The solution to this problem is the adjustable desk, which is said to be a healthier alternative and can help people feel more alert throughout the day.

“Desks need to be in sync with our natural movements,” says Sargent. “If I want to stand, I should be able to stand and if I want to sit, I should be able to sit.”

Sargent says desks today should be able to adjust to any height and conference tables should do the same since research also shows that standing meetings keep groups more engaged and less territorial than sitting meetings.

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Categories Design, Narrative

The Open Office Trap

Yes, open office is all the rage. But there is fallout (as I get older, I can now see there is good and bad in literally everything). Below is a contrarian view on the whole open office collaborative space perspective. Around 70% of all offices are now building open office environments. And with all this openness comes some pretty serious problems. We have already talked about noise and interruptions, but how about these:

–Increased sick days
–Shortened attention spans creating less-than-quality work
–Longer periods to get back to the priority work
–More stress

There are even more below. I highlighted all the issues in green (you’ll notice there’s lots of green).

What does this mean? Instead of just designing space to keep up with the cool crowd, how about designing it to fit your actual requirements? Novel concept.

Next week, I am going back to the mainstream and will be sending some thoughts on office productivity. Stick with our narrative, and you will see all the sides of the debate. Or call us, we live it daily.

Thanks,

Craig
602.954.3762
ccoppola@leearizona.com

P.S.- Do your young guys grind 80 hours a week? In this week’s preview, we give you a taste of what it means to be a runner in commercial real estate. Click here to see the full video on our website.

Runner Pt. 1
If you are unable to view the video, please click here.


The Open-Office Trap

BY 
The New Yorker
JANUARY 7, 2014


PHOTOGRAPH BY VIEW PICTURES/UIG VIA GETTY

In 1973, my high school, Acton-Boxborough Regional, in Acton, Massachusetts, moved to a sprawling brick building at the foot of a hill. Inspired by architectural trends of the preceding decade, the classrooms in one of its wings didn’t have doors. The rooms opened up directly onto the hallway, and tidbits about the French Revolution, say, or Benjamin Franklin’s breakfast, would drift from one classroom to another. Distracting at best and frustrating at worst, wide-open classrooms went, for the most part, the way of other ill-considered architectural fads of the time, like concrete domes. (Following an eighty-million-dollar renovation and expansion, in 2005, none of the new wings at A.B.R.H.S. have open classrooms.) Yet the workplace counterpart of the open classroom, the open office, flourishes: some seventy per cent of all offices now have an open floor plan.

The open office was originally conceived by a team from Hamburg, Germany, in the nineteen-fifties, to facilitate communication and idea flow. But a growing body of evidence suggests that the open office undermines the very things that it was designed to achieve. In June, 1997, a large oil and gas company in western Canada asked a group of psychologists at the University of Calgary to monitor workers as they transitioned from a traditional office arrangement to an open one. The psychologists assessed the employees’ satisfaction with their surroundings, as well as their stress level, job performance, and interpersonal relationships before the transition, four weeks after the transition, and, finally, six months afterward. The employees suffered according to every measure: the new space was disruptive, stressful, and cumbersome, and, instead of feeling closer, coworkers felt distant, dissatisfied, and resentful. Productivity fell.

In 2011, the organizational psychologist Matthew Davis reviewed more than a hundred studies about office environments. He found that, though open offices often fostered a symbolic sense of organizational mission, making employees feel like part of a more laid-back, innovative enterprisethey were damaging to the workers’ attention spans, productivity, creative thinking, and satisfaction. Compared with standard offices, employees experienced more uncontrolled interactions, higher levels of stress, and lower levels of concentration and motivation. When David Craig surveyed some thirty-eight thousand workers, he found that interruptions by colleagues were detrimental to productivity, and that the more senior the employee, the worse she fared

Psychologically, the repercussions of open offices are relatively straightforward. Physical barriers have been closely linked to psychological privacy, and a sense of privacy boosts job performance. Open offices also remove an element of control, which can lead to feelings of helplessness. In a 2005 study that looked at organizations ranging from a Midwest auto supplier to a Southwest telecom firm, researchers found that the ability to control the environment had a significant effect on team cohesion and satisfaction. When workers couldn’t change the way that things looked, adjust the lighting and temperature, or choose how to conduct meetings, spirits plummeted.

An open environment may even have a negative impact on our health. In a recent study of more than twenty-four hundred employees in Denmark, Jan Pejtersen and his colleagues found that as the number of people working in a single room went up, the number of employees who took sick leave increased apace. Workers in two-person offices took an average of fifty per cent more sick leave than those in single offices, while those who worked in fully open offices were out an average of sixty-two per cent more.

But the most problematic aspect of the open office may be physical rather than psychological: simple noise. In laboratory settings, noise has been repeatedly tied to reduced cognitive performance. The psychologist Nick Perham, who studies the effect of sound on how we think, has found that office commotion impairs workers’ ability to recall information, and even to do basic arithmetic. Listening to music to block out the office intrusion doesn’t help: even that, Perham found, impairs our mental acuity. Exposure to noise in an office may also take a toll on the health of employees. In a study by the Cornell University psychologists Gary Evans and Dana Johnson, clerical workers who were exposed to open-office noise for three hours had increased levels of epinephrine—a hormone that we often call adrenaline, associated with the so-called fight-or-flight response. What’s more, Evans and Johnson discovered that people in noisy environments made fewer ergonomic adjustments than they would in private, causing increased physical strain. The subjects subsequently attempted to solve fewer puzzles than they had after working in a quiet environment; in other words, they became less motivated and less creative.

Open offices may seem better suited to younger workers, many of whom have been multitasking for the majority of their short careers. When, in 2012, Heidi Rasila and Peggie Rothe looked at how employees of a Finnish telecommunications company born after 1982 reacted to the negative effects of open-office plans, they noted that young employees found certain types of noises, such as conversations and laughter, just as distracting as their older counterparts did. The younger workers also disparaged their lack of privacy and an inability to control their environment. But they believed that the trade-offs were ultimately worth it, because the open space resulted in a sense of camaraderie; they valued the time spent socializing with coworkers, whom they often saw as friends.

That increased satisfaction, however, may merely mask the fact that younger workers also suffer in open offices. In a 2005 study, the psychologists Alena Maher and Courtney von Hippel found that the better you are at screening out distractions, the more effectively you work in an open office. Unfortunately, it seems that the more frantically you multitask, the worse you become at blocking out distractions. Moreover, according to the Stanford University cognitive neuroscientist Anthony Wagner, heavy multitaskers are not only “more susceptible to interference from irrelevant environmental stimuli” but also worse at switching between unrelated tasks. In other words, if habitual multitaskers are interrupted by a colleague, it takes them longer to settle back into what they were doing. Regardless of age, when we’re exposed to too many inputs at once—a computer screen, music, a colleague’s conversation, the ping of an instant message—our senses become overloaded, and it requires more work to achieve a given result.

Though multitasking millennials seem to be more open to distraction as a workplace norm, the wholehearted embrace of open offices may be ingraining a cycle of underperformance in their generation: they enjoy, build, and proselytize for open offices, but may also suffer the most from them in the long run.

Maria Konnikova is the author of “Mastermind: How to Think Like Sherlock Holmes.”

 

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