Pretty much. Real estate is expensive.
I worked with an internal team that created a brand new office for a decently-sized tech company. We had this exact debate: open or closed. We explored closed, or versions of it (see Spotify’s team rooms as a great example of a compromise), but the end result was the same: if we expected to grow substantially and expand our business a lot, real estate would be the biggest bottleneck. We’d literally have to pay people less and deliver slower if we wanted to make that trade off, and all the companies we talk to who had gone with some form of closed office had shifted to open over time because the costs were huge.
We did the next best thing, because we definitely heard the concerns of people that getting work done at work really was harder than it should be: we created as much private space for 1-2 people as possible that lots of people could use, so you got to decide whether you were in at your desk mode or heads down mode. Several years later, this seems to work all right. There’s still a desire to work from home occasionally, and my teams are pretty understanding about that. Even with the open office plan, though, we still have to rent virtually every open space around us.
45 additional square feet at (a vastly overestimated) $100 per year per square foot for rent. $5,000 construction costs amortized over 10 years.
We’d need to see a closed office productivity increase of double or more to justify it, and we just couldn’t, even talking to other companies that had the kind of collaborative environment we thought of as ideal if we had infinite space. They didn’t see increases at that level.
To be clear, I’m seriously simplifying here. There are so many other considerations like workplace happiness, some amount of creative “collision” differences, churn and burnout, different individual needs for privacy, whether certain collaboration styles enabled by space fit the company culture, the type of work that’s happening, how likely that team structures will be the same in 1 year, 5 years, 10 years. Ultimately, we bet on space flexibility and giving teams more control over their space than giving everyone an office or team room. It’s hard to say what the alternate history would have been, but we do pretty regular surveys about workplace happiness and have seen significant positive increases compared to our old office (also open but much more rigid, far fewer private spaces) and general happiness with people’s access to private space and ability to get work done.
Edit: I also don’t want to overgeneralize. This made sense for us, but I think there are lots of situations where it does not make sense to have an open office, especially if you have a smaller company stocked primarily with very, very high performers doing individually-driven but very deep creative work (in the sense of integrating a lot of information). I would hope all companies would be more thoughtful about it, but I wanted to provide a little look at how a company that values privacy and enabling deep work might still arrive at an open office.
Unfortunately, in an open environment, the most important factors are uncontrollable.
So while the savings is not nothing, when it's that small any potential productivity hit becomes even more of a big deal.
Of course there is other overhead, but space itself is in that range. So the max savings, in the most expensive market in the US, is under $10k per year.
Practically speaking, most people are treating the shift as an implicit agreement that employees can work from home 90+% of the time.
https://www.wired.com/2000/05/is-your-cubicle-shrinking-too/