Projecting Suburban Office Space Demand: Alternative Estimates of Employment in Offices

The boom-bust cycle of the 1980s highlights the need for independent, public sector estimates of office space needs. Buildings that fail to yield full property tax revenues, stand vacant and discourage development in the surrounding environment, displace jobs without creating new ones, and merely succeed in luring tenants from older buildings, have become commonplace in the real estate bust of the late 1980s and early 1990s. The purpose of this paper is to estimate office space demand and show patterns of office space usage in a suburban county. Specifically, we estimate the share of employees in freestanding offices, by empirically observing the share of industry employment in offices in 1986. We then assess the accuracy of our values and compare our results with an alternative, occupational approach. The data is drawn from Prince George's County, Maryland, a suburban county of Washington, D.C. To briefly summarize findings, our empirically based, industry-specific approach indicates there is a changing and wide variation in the share of employment in freestanding office buildings across the two-digit service industries. However, when data are aggregated across all service industries, our results generate estimates of office employment comparable to the earlier occupational approach of Kimball and Bloomberg (1987). Both approaches produce office space demand projections within 9% to 12% of actual leased space.