The Current ‘Plug & Play’ Office Space Phenomenon

By:

  Jeffrey S. Weil, MCR.h, CCIM, SIOR
Senior Vice President
Colliers International
1850 Mt. Diablo Blvd., Suite 200
Walnut Creek , CA 94596
Ph. 925.279.5590  Fax 925.279.0450
jweil@colliersparrish.com
www.officetimes.com

Between 1998 and 2001 hundreds of millions of square feet of office space were leased across the U.S. by dotcom, e-commerce, high-tech, VC-funded start-ups, and yes, even by Fortune 1000 established corporations. During these frenzied years of rapid office absorption companies purchased billions of dollars of new office workstations, private office furniture, file cabinets, new telephone systems, computers, chairs and other office equipment required to house the workforce moving into this newly-leased office space. The bursting bubble collapsed not just the office leasing market but office furniture and equipment industries as well, causing a glut of almost-new office furnishings of every type, style and price range imaginable. Prices of used workstations plummeted. The new 8'x8' workstation ‘cubicle’ which might have retailed for $4,500-6,000 apiece, including two overhead cabinets, underneath pedestal file cabinets and chair at first sold for $2,500-3,500 used, then dropped to $1-2,000 per station and now many of these same units can be purchased for $300-750 apiece.

Older workstations, which formerly had a modest resale value, can now be a burden and companies might find themselves paying vendors or haulers just to truck these units for disposal.

However, one must not be misled by the common perception that while much of today’s used office furniture is only worth ten cents on the dollar, that to fix up an office suite with slightly used furniture and equipment can be done at this price. It may well be that the used furniture vendor offers you ten cents on the dollar for your beautiful Steelcase, Haworth or Herman Miller workstations, but be aware of the additional expenses included if you decide to purchase and install versus sell and remove.

Additional costs vary, but on top of the actual purchase price of a used unit might be added the cost of  delivery to your suite, the furniture broker’s fee, the installation and set-up fee to re-assemble the workstation, and the wiring cost to get your telephone and data connections correctly installed. In the San Francisco Bay Area, as of June 2002, these additional costs may take a unit which cost $500, used, up to a total price of $1,250 installed and connected. The lower prices are usually valid on quantity purchases, i.e. 200 workstations at one time. This still offers substantial savings over purchasing the unit new at $4,500 but, when promising your senior executives incredible bargains, these additional cost factors should be taken into account.

An additional benefit to purchasing used workstations is the ability to get all the 'add-ons' either thrown in or at a modest additional cost.  Its surprising how much the accessories can add up with $60 here and $100 there for the ped files, chair mats, ergo keyboard drawers, hanging shelves, etc. that can be part of the workstation layout.

I advise my clients to count their blessings if they need new space in today's office environment and are able to take advantage of not just today's low rental rates but the incredible price and value of almost-new workstations and office furniture.  These deals won't last, and as the market slowly absorbs the available used furniture inventory expect to experience increasingly higher prices (i.e. lessening of the discount factor) and less selection.  As is almost always the case, the great brands (Steelcase, Herman Miller, Haworth, Teknion) will disappear first, and at some point over the next 1-2 years discounted new furniture systems may come back into favor by default.

Jeffrey S. Weil, MCR.h, CCIM, SIOR, Senior Vice President at Colliers International, has represented office tenants in their lease renewal, relocation, subleasing and strategic planning since 1976 and can be contacted at jweil@colliersparrish.com.           

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