Every day we negotiate office leases. In 2019 alone, our team completed 145 leases. One item we always negotiate is rent per square foot. As we negotiate this for our clients, we also talk to them about how they could, and probably should, be looking at the rent differently than just per SF.
Recently, we moved a corporate headquarters to Phoenix from Sacramento. In CA, they had 6,500/sf at $25/sf. The CEO wanted to lower costs by moving to AZ. In the final terms, the rent per square foot was not lower than CA but the space utilization was way better. This enabled us to lease 25% less square footage and achieve his ultimate goal of rent reduction. This is just one example of how space utilization metrics have changed over the last decade.
Here are a few we look at for our clients:
– Cost per person. When you add shared spaces, you can dramatically reduce costs. We use this all the time.
– Daily peak utilization by space. How often are you really using that conference room? We found most companies book the room by the hour (and use it less than half that time) and they book rooms for 10 people when the meeting is for 4 people. When laying out new conference rooms, we ask our clients to track actual usage so we can be way more accurate than a booking log.
– Target ratios for building or even groups within the client’s space. Most of our clients are now open to restructuring their layouts to allow for the potential to reduce costs. We start with individual teams within the office, then roll each one into the whole space design.
If you want to get into the weeds on this topic, read the article below by Ian Morely. If you want a real-life discussion on your space, shoot me an email. Of course we work with the best of the best interior designers and furniture companies in the market to pull all of the above together.
Workplace Space Utilization Metrics You Need to Know About
Old Space utilizations metrics result in higher workplace costs.
By Ian Morley
Efficient space utilization is critical as today’s workforce is increasingly mobile and working from home or from wherever they need to be. Yet with fewer and fewer people in the office, the costs of corporate real estate are still mounting. Walking through most office buildings, it’s easy to see how much space is wasted: about 3 out of every 5 desks sit empty at any given time.
It’s not surprising that in most companies, the pressure is on to improve space utilization and reduce corporate real estate expenses. But before you can begin optimizing your workplace, you need to fully understand your current utilization. That’s where space utilization metrics can be so useful… or not. If you’re tracking the wrong data, it can’t help you make the best possible use of your space. Or worse, the wrong data can cause you to focus on the wrong areas and away from the low-hanging fruit. The right space utilization metrics can not only drive down the cost of real estate, but even help you drive innovation throughout your company.
Are You Still Using Old Space Utilization Metrics?
In the old days, tracking space utilization metrics meant tracking how much you spent on space: cost per square foot. Unfortunately, this information is not all that useful, since the only thing you can do to improve it is look for cheaper space. That may not be an option for many reasons: less expensive space may not be available where you need to be, you may be in long-term leases, or the cost of relocating may negate the space cost savings.
Another outdated way of approaching space utilization metrics is to track density, or square feet per desk. Once again, there is only one thing you can do with this information: squeeze more desks into your existing space. That means changing fit-outs to use smaller cubicles, smaller offices, and smaller shared spaces such as conference rooms. This approach adds the cost of retrofitting, but doesn’t address the basic problem: people are not using those desks all day, every day anymore. It may even compound the problem since those claustrophobic spaces may encourage more people to work remotely. Even worse, to fit in more cubicles you may need to lose shared spaces that increase employee collaboration and drive innovation.
When you focus on cost per square foot or density for space utilization metrics, you’re missing out on much more effective ways of driving down workplace costs.
The New Space Utilization Metrics
Modern companies have moved to tracking cost per person as a more useful option for space utilization metrics. Measuring the cost of space per person as your key metric provides the necessary data to actually optimize the usage of the space you have, rather than merely swapping out for cheaper space or cramming in more desks.
Taking this approach to space utilization metrics gives you the information you need to move from the old assigned-seating model to an agile work environment. That means transitioning from dedicated workstations for each employee to shared spaces that workers use as needed, which allows you to get rid of wasted space and cut your cost per person nearly in half. What’s more, since you don’t need to cram in so many desks, the agile work environment can be a much more enjoyable and productive environment for your employees.
More space utilization metrics that drive down cost per person
Within the agile work environment, you’ll want to track these additional space utilization metrics to further improve your cost per person:
Daily Peak Utilization by Space. This metric tracks the maximum number of people coming into a particular space on any given day.
Daily Peak Utilization by Business Unit. This metric tracks the maximum number of people from a specific business unit entering a space on a given day.
Average Peak Utilization. The average peak usage of a space over a specified period of time. This number can tell you if you have enough seats in the space to meet your average demand, especially if you plan for two standard deviations above your average.
Frequency of Peaks. This number tells you how many times you reach your peak utilization over a period of one month. You might find that you reach peak only on days when certain meetings are taking place, but the rest of the month the space is nearly empty. Knowing these space metrics can drive adjustments to assigned ratios and/or alternate plans for peak utilization days.
Target Ratio Per Building or Group. This is the target you’re working toward for the number of people you can accommodate per seat, for a particular building or group. For example, you might have a KPI to accommodate 1.5 people for each seat.
Assigned Ratio Per Building or Group. This is ratio of people assigned to seats in a particular building or group. Many companies begin by assigning 12 people to 10 seats as a starting point when moving to an agile work environment.
Actual Ratio. This is the actual number of people using the seats. You might have only 5 people actually coming in to use 10 desks.
4 Benefits of an Agile Work Environment With Modern Space Utilization Metrics
Moving to an agile work environment and adopting better space utilization metrics is all about making your buildings work better for you and for your employees.
1. More efficient use of space
When you track the more useful space utilization metrics described above to truly understand your space requirements by building and by line of business, you can design an agile work environment that allows your workplace to become more fully utilized. When you take a walk through the building, you will no longer find a sea of empty desks.
2. Virtually eliminate move costs
In a traditional assigned seating model, as much as 14 percent of your real estate budget is spent on moving people around. When every person is attached to a desk they barely use, a great deal of money is spent unnecessarily to accommodate business requests for more space every time they increase head count. In an agile work environment managed with the right space utilization metrics, these costs are greatly reduced, since people can largely move themselves.
3. Encourage collaboration and innovation
The agile work environment will often have activity-based working spaces that are designed for the type of work an employee needs to do on a given day. For example:
open and comfortable areas for group work sessions
small conference rooms for team meetings
video conference rooms for meetings with people from different regions
isolated quiet areas
“phone booths” for people making calls
These spaces boost efficiency and productivity since employees can choose the space the need depending on the task they need to complete. People can also choose where to work based on the people or teams they need nearby. These features increase interaction and collaboration, and foster creative thinking and innovation.
4. Attract and retain talent
In many industries and regions of the world, corporations are struggling to attract top talent and retain the employees they need to be competitive. Offering the modern and comfortable features of an agile work environment (managed by the right space utilization metrics) can be a valuable perk that leads top candidates to choose to work for you.
Gaining the benefits of an agile work environment depends on your ability to track the right space utilization metrics.