Impact of information and communications technology on real estate space

Abstract

PurposeWill the information and communications technology (ICT) prevail over the market and agglomeration forces in inducing a negative demand in office space? The evidence of long‐term impact of ICT use is not conclusive at this stage. This study aims to empirically test whether space reduction effects of ICT are significant in the office market in Singapore. The study also seeks to examine variations in firms' responses, and how increasing use of ICT will impact on firms' operational and activities that include productivity, staffing structure and requirements, adoption of working practices, quality of customer service, and importance of a central meeting place.Design/methodology/approachThe primary data were collected in a mailed questionnaire survey conducted in July and August 2002, which involved a sample of 2,049 firms randomly selected from 121 office buildings located in the CBD and other key office submarkets in the fringe of CBD in Singapore. The firms' perception of ICT impact on real estate space needs was asked in the survey, and the variations in their responses were empirically tested with respect to factors like business types, firms' attitude towards ICT use, and their ICT strategies. Two different statistical tests are used in the tests, which include a non‐parametric chi‐square analysis and a logistic regression model. The chi‐square analysis examines different treatment effects of sample firms on the response variables. The logistic regression model jointly tests relationships between the respondent firms' binary choice of ICT impact on office demand and firm business types and views towards ICT and NWPs.FindingsBased on a mailed questionnaire survey conducted on office occupiers in CBD of Singapore, 79 percent of the respondent firms felt that there is no negative impact of an increase use of ICT on the office space; 63 percent of the respondent firms, however, agree that ICT‐enabled changes to working practices were more important in affecting real estate space changes of firms. In the logistic regressions, the results showed that four variables that represent firm characteristics and their attitude towards ICT use were significant in explaining the variations in the firms' perception of no significant impact of ICT use on office space demand. Market rent factor was found to have no influence on the perception of a negative ICT‐office space relationship by the sample firms.Originality/valueImpact of ICT use on firms' office space needs have not been as pervasive as expected in office markets. There are frictions and resistance by firms and their employees against the adoption of ICT in the office place in many countries. The study based on a random sample of office occupiers in Singapore's CBD and fringe submarkets supports the observation. Only 21 percent of the respondents felt that they can reduce office space with more ICT use. However, more sample firms (63 percent) felt that ICT will enable flexible workflows, which in turn will change the way corporate real estate strategies are designed. Firm characteristics and their attitude towards ICT are factors in determining firms' perception towards ICT use in offices.