Agglomeration Economies Still Matter and Will Bring Back Cities and Offices

Prior the pandemic–people saw the benefits of agglomeration economics: the advantages to business of physical proximity of an industry or industries. During the pandemic–such proximity became toxic and was avoided. We managed to keep connected through video conferences but unable to reproduce the benefits of agglomeration economies. I saw the buzz such economies caused during the rebirth of SOMA after the dot com boom. I recently noticed it in a new forming center of technology. https://www2.lehigh.edu/news/office-space-extinction-a-look-at-agglomeration-economies. https://www2.lehigh.edu/news/office-space-extinction-a-look-at-agglomeration-economies.  Read more below.

Source: Office Space Extinction? A Look at Agglomeration Economies | Lehigh University

What is a major workplace impediment – both at home and at the office– costing you money, productivity, health, mental performance and quality of sleep?

It is the daylighting in your office. The benefits of daylight to office workers are so great, in fact, that many countries in Europe require workers to be within 27 feet of a window.

Daylight reduces the occurrence of headaches and eyestrain. The proper integration and management of daylighting in an office building provides the best spectrum of light for the eye. When the eye is not allowed to refocus to different distances over long periods of time, the dilating muscles are conditioned to a limited range of perspective, promoting near or far sightedness (Edwards and Torcellini). Professor Alan Hedge of Cornell University also found that daylit offices resulted in an 84% drop in symptoms of eye strain, headaches and blurred vision (Professor Alan Hedge).

Daylight increases worker productivity. In 1983, Lockheed Martin designers successfully increased interaction among the engineers by using an open office layout with integrated daylighting in their offices in Sunnyvale, California (Romm and Browning 1994). This increase helped boost contract productivity by 15%.

At the Rocky Mountain Institute in Snowmass, CO, Lockheed officials believe that the higher productivity levels pertaining to daylighting helped them win a $1.5 billion defense contract (Pierson 1995).

VeriFone, Inc., located near Los Angeles, California, constructed a new daylit worldwide distribution center and reported increased productivity a year and a half after they started using their new building. Productivity at VeriFone increased by more than 5% and total product output increased 25%–28%, making the new building more cost effective than first predicted (Pape, 1998, as cited in Edwards and Torcellini, page 10).

The value of the increase in productivity greatly outweighs the cost. For example, Lockheed Martin reported financial savings due to increased productivity by moving some of its offices to a daylit building. Lockheed calculated that “every minute less of wasted time per hour represents a 1.67% gain in productivity” (Thayer, 1995, as cited in Edwards and Torcellini, page 12).

Daylighting reduces Absenteeism in the Office and Employee Turnover (Franta, G.; Anstead, K., 1994).

Daylighting results in better sleep and quality of life. Impact of Workplace Daylight Exposure on Sleep, Physical Activity, and Quality of Life,” Northwest University. Exposure to Natural Light Improves Workplace Performance. Cohere found that those working near a window had around 46 minutes more sleep each night – a statistic backed up by HR advisory firm, Future Workplace, as part of ‘The Employee Experience’ study which revealed that daylit working environments presented a 56% reduction in feelings of drowsiness.

Daylighting lowers energy costs. Save the Bulbs reports that with more light being provided by the great outdoors, you can use less light in your office and save on your energy costs. That’s what happened with a Lockheed Martin office in Sunnyvale, CA – the company saved an estimated $300,000 – $400,000 when it revamped its office to let in more natural light. While this is an extreme example, you may still be able to save some money by introducing more natural light, even if your savings don’t amount to a six-figure number.

Daylighting increases creativity. A recent neuroscience study, Rewilding Design | Light, carried out by wellbeing practitioners found that 40% of workplaces with access to daylight experienced up to 40% more productivity and sales. The same body of research also revealed that those working in naturally lit working environments were shown to be 15% more creative.

Daylight improves concentration and short term memory. Better concentration and improved short-term memory were both observed in office workers who had been exposed to natural light, according to a 2003 California Energy Commission study.

Daylight may be the number one office perk desired by employees?

When it comes to making a workplace function at peak productivity, it isn’t about the meals and snacks, coffee bars, ping pong tables, or treadmill desks. The amenity that employees are clamoring for most is something simpler and more readily abundant: natural light.

In study after study, office workers say natural light in the workplace is a top perk that helps with overall happiness and productivity levels. In fact, a survey conducted of over 1,000+ U.S. respondents found that 83% of employees say natural light is important to have at their workspace. Despite this, only 50% have access to it. Let there be light: Why natural light is the #1 office perk.

What is the problem with fluorescent and LED Lighting?

All fluorescent lights – and most LED lights – flicker, which can cause headaches and eyestrain and contribute to decreased productivity, leaving workers feeling exhausted at the end of the workday. But conscientious workplace designers can limit the amount of flickering with LED lights by being thoughtful about what lights and power sources they use. Let there be light: Why natural light is the #1 office perk.

Additional Citations:

L. Edwards and P. Torcellini, July 2002, A Literature Review of the Effect of Natural Light on Building Occupants, page 9. NREL. https://www.nrel.gov/docs/fy02osti/30769.pdf

Franta, G.; Anstead, K. (1994). “Daylighting Offers Great Opportunities.” Window & Door

Specifier-Design Lab, Spring; pp. 40-43. http://www.sciepub.com/reference/240266

Ott Biolight Systems, Inc. (October 1997a). “Ergo Biolight Report.” California: Ott Biolight Systems, Inc. (1997b).

Professor Alan Hedge from the Department of Design & Environmental Analysis. https://www.nbcnews.com/better/pop-culture/sitting-window-can-boost-your-productivity-ncna873991. Daylight & The Workplace Study, How does natural light in the workplace improve employee physical health, Cornell University. https://view.com/resources

Romm, J.J; Browning, W.D. (1994). “Greening the Building and the Bottom Line: Increasing

Productivity Through Energy-Efficient Design,” https://rmi.org/insight/greening-the-building-and-the-bottom-line/

Pierson, J. (November 20, 1995). “If Sun Shines In, Workers Work Better, Buyers Buy More.” AP News. https://apnews.com/article/2da84b8feee97fab28c1cee2b9b6aadc

The Dangers of A Remote Workforce for Your Employees and Your Business

The Dangers of Remote Work for Your Business

Per a survey by the Harvard Business Review, 89% of office worker respondents said their general workplace wellbeing has declined during the pandemic while working from home. Here are the dangers of remote work:

  1. Burnout:  Per the Harvard Business Review, the vast majority of remote workers have experienced work from home burnout (1). According to another survey of 1000 employees at companies with at least 500 people, 72% reported they were experiencing burnout, up from 42% prior to the pandemic (10).
  2. Isolation:  Also per the Harvard Business Review, employees in remote work have experienced a loss of connections with co-workers (1). Per a McKinsey survey, feelings of isolation ranked the highest as the leading factor that worsened during mandatory work from home (2,3).
  3. Lack of work-life separation and balance:  Per both Harvard and McKinsey,respondents reported that they worked longer hours either due to a lack of setting time boundaries by themselves or by their superiors. This led to more stress and mental health issues (1,2,5).
  4. Reduction of desire to socialize with friends and family via telephone:  Zoom or telephone calls meant for social conversations are seen as chores after having so many calls for work (1).
  5. Zoom fatigue:  People experienced exhaustion after multiple video calls. It turns out that millisecond delays in virtual verbal responses negatively affect our interpersonal perceptions, even without any internet or technical issues. MRI data reveals that live, face-to-face interactions, compared to viewing recordings, are associated with greater activation in the same brain regions involved in reward (i.e., ACC, ventral striatum, amygdala). So more active social connection is associated with more perceived reward, which in turn affects the very neurological pathways modulating alertness versus fatigue (11). Sanford University research also suggest zoom fatigue can drain you after a work day and takes more of a toll on your brain and body than regular office work.  Researchers explain zoom fatigue results from the excessive and intense eye contact, constantly watching video of yourself, the limited mobility of being stuck at your desk, and more energy spent identifying social cues you’d otherwise pick up on intuitively in person (26).
  6. Can cause lower productivity and back/neck problems from inadequate home work conditions:  Per McKinsey, 41% of workers globally are not satisfied with their home/work situation due to working conditions or other occupants. In these cases, engagement and productivity drops more significantly when work-from-home frequency increases (2,3). Workers have also experienced an increase in back and neck problems due to improper ergonomic furniture used in remote working (18).
  7. Can lower the speed of decision making; clarity of responsibilities suffers as people work from home (4).
  8. Reduction in collaboration:  You can’t replace walking into someone’s office to brainstorm (10).  Both research and development and sales teams are struggling to maintain dynamic collaboration and brainstorming (14). “Coming together in person to collaborate and build community is core to Google’s culture, and it will continue to be an important part of our future,” CEO Sundar Pichai said in an blog post Thursday. He went on to say, “…we continue to make significant investments in our offices around the country…” (20). 
  9. Failure to benefit from agglomeration economies:  When workers and firms in similar industries are located near one another, it is easier to find specialists, capital providers, and vendors.  Knowledge tends to spill over from one employee to the other (6).
  10. A reduction of serendipitous innovation:  To encourage serendipitous innovation, Steve Jobs once conceived of a single, centrally located bank of bathrooms. The pandemic has stifled such creativity; Boston Consulting Group found that companies’ spirit of innovation has declined precipitously as their workforces got dispersed this year. (5, 6, 10, 15).
  11. Less social enjoyment by employees:  This decline has been caused by a reduction of benefits from the collision of urban work, culture, and art. It is the difference between being at a party and being on Facebook (6). Based on C&W’s European young employees survey of more than 1,200 respondents, 60% of students and young professionals want their workplace to be in a busy and lively part of the city that provides access to local amenities such as shopping, dining, and recreational activities (14).
  12. Difficulty in mentoring employees:  Studies of call workers who have been working from home show those workers were much less likely to be promoted because they failed to gain the skills needed to handle hard calls (9, 14). Such skills were better gained in face to face training (19). 
  13. Reduction in employee engagement:  Steelcase found that engagement declined 14% during the pandemic (4).  social interaction is strongly correlated with workplace engagement and satisfaction. A Gallup study surveying more than 15 million employees indicated that those with a “best” work buddy are “seven times as likely to be engaged in their jobs, are better at engaging customers, produce higher quality work, [and] have higher well-being,” compared to those without 25.
  14. Harder to identify improper behavior (7).
  15. Risk to confidentiality and client privacy (7).  Client information and trade secrets are less secure when exposed to either other household members or visitors.
  16. Harder to install corporate culture (7,9,24).
  17.  Internet connectivity to server can be less reliable than in office connectivity. Research reveals four-fifths of home workers experiencing unreliable internet connection while working from home, with nearly half having slow and or unreliable internet connections (12). 
  18. Difficulty attracting young tech workers:  Most younger tech workers prefer to work in an office (13). This is where they can find mentoring and exposure, as well as enjoy the cultural advantages of the urban work environment. Cushman reported that 70% of Gen Z and 69% of Millennials report challenges in working from home (14).
  19. Greater difficulty onboarding remotely:  Despite the resilience of tech companies during COVID, new hires are down over 40% (9). Pre-existing relationships can coast along but the tech industry is struggling to find new workers (19). 
  20. Any productivity gains and success from remote work may dissipate when the pandemic ends:  For many remote employees during the start of the pandemic, there was little else to do but focus on work. As COVID progressed, however (and likely in a non-pandemic world), this has not remained the case. According to the latest ONS surveys, more businesses are reporting that remote workers’ productivity has decreased as the pandemic has persisted (17).
  21. Less likely to be promoted and be involved in significant decisions:  “Many important decisions must be made quickly—how to handle an accident at a plant, a product recall or an immediate need from a client, say—and people who are on the spot naturally get more of a say. In a study conducted in two large tech firms, employees found that they got less respect when they began working remotely and ended up being less involved in significant decisions.”  “Remote workers also miss the chance to stay up-to-date about company norms or recent events, things that come from observing others and networking in real life. When we hear the boss mutter something under her breath after reading the latest requirement from human resources, we learn not to make it a priority (21).
  22. Home networks are more likely to be hacked. “In a 2018 survey by Wi-Fi security company IPass, 57% of CIOs reported they suspect their mobile workers had been hacked or were the cause of security problems. Only 46% percent could be “confident” their remote employees used virtual private networks (VPNs) to increase security when connecting to company networks” (22).  “Per a sample of 41,000 US based organizations, home networks were 3.5 time more likely than corporate networks to have at least one family of malware and 7.5X more likely to have at least five distinct families of malware.  More than 25% of all devices have one or more service exposed on the internet.  The corporate network is much more exposed to threats as the number of work from home users increase” (23) .
  23. Remote Work will Lead to Higher Employee Turnover:  Gallop Poll shows that for those individual with a preference for working in person, remote work can be as serious as a 24% higher turnover (24).

References:

  1.  What Covid-19 Has Done to Our Well-Being, Camppbell and Gavett, Harvard Business Review,  Feb 10, 2021. https://hbr.org/2021/02/what-covid-19-has-done-to-our-well-being-in-12-charts
  2. Reimagining the office and work Life after Covid, Boland, Emmet, Palter, Mckinsey & Company, June 8 2020 https://www.mckinsey.com/business-functions/organization/our-insights/reimagining-the-office-and-work-life-after-covid-19
  3. Work Better, Steelcase, https://www.steelcase.com/research/articles/topics/work-better/work-better/
  4. Global Report, Changing Expectations and the Future of Work, Steelcase,   https://www.steelcase.com/research/articles/topics/work-better/changing-expectations-future-work/, Working From Home Around the World, https://www.steelcase.com/research/articles/topics/work-better/working-home-around-world/
  5. How Small Cities are Trying to Plug America’s Brain Drain, Daneil Oberhaus,Wired Magazine. https://www.wired.com/story/how-smaller-cities-trying-plug-brain-drain/
  6. Not Even a  pandemic can break rich cities grip on the US economy, Shaban, Oct 15,2020, Washington Post. https://www.washingtonpost.com/road-to-recovery/2020/10/15/wealthy-cities-bounce-back-from-coronavirus/
  7. FMSB published Spotlight Review on Examining Remove working risks in FICC markets,  July 27,2020,FMSB.  https://fmsb.com/fmsb-publishes-spotlight-review-on-examining-remote-working-risks-in-ficc-markets/
  8. The New World of Work,  DealBook Debrief, July 27, 2020, New York Times, https://www.nytimes.com/2020/07/27/business/dealbook/remote-work-risks.html
  9. Remote work 1 year later:  The Pandemic sent tech workers home—when and how will they return, Kurt Schlosser, March 4, 2021, Geek Wire.  https://www.geekwire.com/2021/remote-work-1-year-later-pandemic-sent-tech-workers-home-will-return/
  10. If Work is Going Remote, Why is Big Tech Still Building, Gregory Barber, Wired Magazine, https://www.wired.com/story/work-going-remote-why-big-tech-building/
  11. A Neuropsychological Exploration of Zoom Fatigue, Jena Lee, November 17,2020 Psychiatric Times.  https://www.psychiatrictimes.com/view/psychological-exploration-zoom-fatigue
  12. Poor connectivity sees home workers lose over half an hour work day,Joe O Halloran, August 20, 2020, Computer Weekly.  https://www.computerweekly.com/news/252487354/Poor-connectivity-sees-home-workers-lose-over-half-an-hour-of-work-a-day
  13. Cities and Startups are Poised for a great Reboot, Anna Meyer, https://www.inc.com/anna-meyer/arnobio-morelix-covid-pandemic-recovery-cities-startups-tech.html
  14. Cushman and Wakefield, Future of the Workplace 2021, https://www.cushmanwakefield.com/en/insights/covid-19/the-future-of-workplace
  15. Work From Home Fallout:  Productivity Up, Innovation Down, Joe McKendrick, Oct 18, 2020, Forbes, https://www.forbes.com/sites/joemckendrick/2020/10/18/work-from-home-fallout-productivity-up-innovation-down/?sh=1da331fa668d
  16. The Future of Work After Covid-19, McKinsey & Company,  Lund, et al.  https://www.mckinsey.com/featured-insights/future-of-work/the-future-of-work-after-covid-19
  17. Why Remote Working in the Pandemic Has Been A Drag on Productivity, Jeeger Kakkad, March 8, 2021, Tony Blair Institute for Global Change, March 8, 2021. https://institute.global/policy/why-remote-working-pandemic-has-been-drag-productivity
  18. Work From Home in Taking a Toll On Our Backs and Necks, Aaron  Zitner, May 13, 2020, Wall Street Journal, https://www.wsj.com/articles/working-from-home-is-taking-a-toll-on-our-backs-and-necks-11589398420
  19.  Edward Glaeser, video interview on Return to Office, USC Lusk Center for Real Estate Facebook, https://www.facebook.com/luskcenter/videos/468863324464113/
  20. Google to spend $7 billion on data centers and office space in 2021, Jennifer Elias, March 18, 2021 , https://www.cnbc.com/2021/03/18/google-to-spend-7-billion-in-data-centers-and-office-space-in-2021.html?__source=sharebar|email&par=sharebar.
  21. “Aftter Covid, Should you Keep Working From Home?  Here’s How to Decide, Cappelli and Bonet, March 19, 2021.  https://www.wsj.com/articles/after-covid-should-you-keep-working-from-home-heres-how-to-decide-11616176802
  22. Security Challenges of Remote Workforce, Identity Management Institute, https://www.identitymanagementinstitute.org/security-challenges-of-remote-workforce/
  23.  Identifying Unique Risks of Work from Home Remote Office Networks, Dahlberg, April 14, 2020, Bitsight, https://www.bitsight.com/blog/identifying-unique-risks-of-work-from-home-remote-office-networks
  24. Remote Work:  Is it a Virtual Threat to Your Culture, Herway and Hickman, Workplace, August 25,2020 https://www.gallup.com/workplace/317753/remote-work-virtual-threat-culture.aspx
  25. The Negative Effects of Working From Home on Company Culture, March 14,2019, Coworking Resources https://www.coworkingresources.org/blog/the-negative-effects-of-working-from-home-on-company-culture
  26. Zoom fatigue is apparently a real  thing, and there are 4 main culprits, Dale Smith, March 6, 2021, CNET Health and Wellness  https://www.cnet.com/health/zoom-fatigue-is-apparently-real-stanford-researchers-know-what-causes-it-4-main-culprits/

PMI Implementing New Methods to Improve Indoor Air Quality–Why is This Important?

Relevant now more than ever, research shows that a healthy and efficient work environment revolves around good indoor air quality. Over two-thirds of employees say indoor air quality has a significant impact on their daily productivity and wellness; this Workplace Wellness Study, conducted by Future Workplace, gives crucial insight into how important the workplace environment is for employee productivity, engagement, and satisfaction. Further, a survey by Bain revealed that safety was the second biggest factor in an employee’s willingness to go back to the office (after vaccination).

Despite this evidence, many employers’ health and wellness methods are insufficient. The key is to focus on the basics, which is precisely what we have done at PMI Properties. We continually strive to make our buildings and tenants safer during this COVID-19 outbreak. In addition to the sanitizing and social distancing signs, we have implemented the following additional programs to help prevent the spread of airborne viruses

We have installed 16 I-wave air technology in our larger HVAC units. These units are proven to sanitize odors and kill germs and viruses, including the COVID-19 virus. The units produce ions that address pathogens through the coil, duct and living space, making it an active purification system. Pathogen tests using proprietary NBPI Technology show that within fifteen minutes, 92.6% of the COVID-19 virus was inactivated and at 30 minutes, 99.4% of the virus was inactivated.

We have upgraded our HVAC filters to MERV 13.  The COVID-19 virus attaches itself to droplets and droplet nuclei that are predominantly 1 – 4 microns in size. MERV 13 filters are 85% efficient at removing particulates from the air at the 1.0 – 3.0 micron range and 90% efficient in the 3.0 – 10 micron range.

For most HVAC units, we have installed eyebrow openings in the small package units or air dampers in our larger HVAC units to allow for more outside airflow, diluting the recirculated air and any potential viruses.

We have fixed all operable windows where they were inoperable. 

We are installing operable windows/doors in many suites that do not have any exterior openings. We recommend that windows be kept open to further dilute any potential viruses and promote more air exchanges during the Covid pandemic.

We have estimated our air exchange rate to make sure that the above measures are sufficient. We look at the amount of time the air in your suite is filtered per hour, mixed with new outside air, and passed thru the Iwave and then returned to the suite.

We are conducting checks of CO2 in some suites. CO2 can be used as a proxy for the adequacy of ventilation.

During this pandemic, the needs of our tenants are of paramount importance to PMI. Our goal in implementing these new programs is to ensure the highest quality standards are met for our tenants’ health, wellness, and safety.

PHP Agency Moves Into Coveted Creative Office Space in Culver City

PMI Properties is excited to announce that PHP Agency, the company whose vision is to change the culture and diversity of the insurance industry and build the world’s largest financial services marketing company in history, has moved into an 8,700 square foot office space at 8673 Hayden Place. This creative office space, with 22-foot high glulam beam ceilings and skylights, is located in the Hayden Tract in Culver City and is situated in between corporate offices for both Nordstrom and Beats Electronics. James Wilson and Dave Wilson of Lee & Associates West represented the landlord, and Jared Smits of Lee & Associates North represented the tenant for this two year lease.

San Francisco isn’t dying, despite tech departures

San Francisco will stage a comeback. I was in SOMA as early as 2003 when the creative offices were considered toxic economic real estate and were being purchased by residential developers to convert into apartments. What helped San Francisco turn the corner were the lifestyle, restaurants, bars, Giants, Warriors, Tech Conferences, Tech parties, tech meetings, tech socializing, tech exhibits. This attracted a flood of young software engineers into the City to experience that lifestyle. Then the employers followed.   An example of SF lifestyle is what happens to SOMA during a Giants game during the work week when SOMA shuts downs and everyone is walking to the stadium. All of that is shut down now. I agree that SF pricing got ahead of itself and perhaps rents will need to fall and slowly recover to allow a catch up. But the City has a lot to offer. Once the politicians switch horses (including the progressives) and help the recovery as they did in after 2005 (took a while to come along)–the recovery can gain some steam.

Source: San Francisco isn’t dying, despite tech departures

Parallel Systems Moves Into Coveted Creative Office Space in Culver City

PMI Properties is excited to announce that Parallel Systems, the company building autonomous zero-emissions freight transportation, has moved into an 8,700 square foot office space at 8673 Hayden Place. This creative office space, with 22-foot high glulam beam ceilings and skylights, is located in the Hayden Tract in Culver City and is situated in between corporate offices for both Nordstrom and Apple’s Beats Electronics. James Wilson and Dave Wilson of Lee & Associates West represented the landlord, and Jake Zacuto of the Zacuto group represented the tenant for this two year lease.

8671 - 8673 Hayden with spec&rate

Parallel Systems, newly founded in 2020, is designing an autonomous, zero-emissions freight transportation system. They believe the future of freight transportation should be fast, inexpensive and clean, while also reducing congestion on the highways. They both design and manufacture electric vehicles as well as write software.

This office space at Hayden offers tenants prime access to all of Culver City and even Culver City Park.

Work From Home and the Office–It’s Too Soon to Tell

There is enormous speculation about the impact of work from home (“Work From Home”) on the office market. Although tech progress and Covid practices will have a long term impact on Work From Home and office utilization–it is too soon to draw any significant conclusions. At the moment, office space is considered to be toxic and therefore very harmful to your health. It is also illegal for non-essential workers to utilize. Therefore, the office right now is a very tough sell. Next, the City is shutdown–no restaurants, bars, jazz clubs, sport games, concerts, museums, festivals, theatre. Indeed, the City is like Disneyland but you can’t go on any rides, see any shows, or attend any parades–a very tough sell. These distorted conditions are causing distorted behaviors. We cannot and should not draw long term inferences from behaviors during these conditions.

I will let you into a little secret:: the office market gets crushed in every recession. Office space is the luxury good of the work world. It gives that boost during expansions. It does really well in long expansions. Office space is not a big expense at 3 to 5% of revenues when a firm is in growth mode. It get cut back in recessions.

We will have a lot to learn about how to integrate Work From Home and our offices. How do we integrate the video conference with remote workers with workers physically around the table? Do we use large screens throughout the room or does everyone have a small screen around the table (which may be better for my favorite application –“share the screen mode”). I believe we will use Work From Home to relieve congestion, long commutes, and allow more homeownership. That will in turn make offices and cities more enjoyable. Offices will be made more productive and collaborative and serve as a tool to give a business an edge during the expansions. These trends are not new. I have attached my blog from 1996 where I discussed both Work From Home and the Collaboration Office evolution.