[andrew93101]

If you compare the cost of renting commercial space to the cost of software engineer labor, this explanation doesn't hold up.

The cost of commercial rent is minuscule when compared to the cost of engineering labor. If a business believed doubling floorspace would genuinely increase productivity by even 10%, it would be a no-brainer financially.

[luser001]

One (space per engineer) is much more controllable than the other (pay per engineer). Hence it gets controlled.

You've got to cut what you can, not necessarily the biggest expense.