Depending on your industry and location, rent accounts for anywhere between 6% and 88% of operational costs, with space accounting for the most expensive line item.
For facility owners to get the most return on investment from each property, it is vital to have a consistent way to track, understand, and improve space utilization. Therefore, facility managers should have the ability to get clarity on the size of each property, layout, current conditions, and property features.
Before being able to measure and improve space utilization, facility managers need to have a strong understanding of what space utilization is, and this article will do just that.
What is space utilization?
Space utilization is the measurable value you get out of your commercial real estate. In an office context, this measures how many spaces employees have to work from and how often they are present in these spaces. This is especially important in today’s climate of hybrid-and-remote work models where employees are not necessarily required to be present in the office every day of the week.
Let’s explore some reasons why office space utilization is key to facility management.
6 reasons to improve office space utilization
As with all capital and operational expenditures, you can optimize your space utilization to pay less – and/or get more value. This value manifests itself in both financial and non-monetary benefits. We explore some key ones in this section.
1. Greater health and safety
Earlier, we mentioned risk reduction as a cost-cutter. When you improve space utilization, you reduce hazards and can increase employee well-being.
2. Better talent retention and productivity
Plan space more strategically for office workers so they can concentrate better when they need to focus and they can interact more collaboratively when tasks require teamwork. All that enablement translates into happier people, which results in lower turnover and hiring costs.
3. Your staying power
Corporate headquarters relocations cost US businesses over $14B per year. When you focus on utilizing your existing space, you reduce the pain points that may otherwise cumulate and push you to relocate.
4. Improved building sustainability
Willem Janssen, Director of National Offices at Colliers, says that how you use (or misuse) your space impacts your carbon footprint. “Buildings with eco credentials will outperform those without them,” he writes. “Sustainability was a tick box, but now it is a mindset for all stakeholders.”
5. Convey the long-term vision for the space
Businesses that ditch short-term thinking for more enduring success outperform their peers financially, according to experts at the McKinsey-founded nonprofit FCLTGlobal. Clients and institutional investors alike are attracted to enterprises that show an enduring power, and better utilization of your space can express such fortitude.
6. Ancillary data collection
When you begin tracking workplace usage metrics, unexpected and often valuable insights emerge. One leader started measuring space utilization data and soon noticed that her group’s employee footfall patterns showed meeting rooms being misused for quiet, deep-focus work. The revelation enabled her company to create more quiet areas where team members could concentrate.
How to calculate your current office space utilization
So, how can facility managers build a framework to understand how a space is currently being used relative to how well it can be utilized?
There are two ways to quantify how you’re utilizing your CRE work environment at any given moment: the quick, broad way and the gritty, detailed way. The first gives you and non-technical audiences a succinct (albeit less accurate) snapshot, and the second a more nuanced and specialized understanding.
The generalized way: A simple space utilization formula
Learn the basic space utilization equation first. This generalization gives everyone (especially employees that will be directly impacted by efforts) a shared language and understanding for your space optimization efforts.
It’s simply the number of workers actively on-site divided by the number of people permitted to be there (allowable space occupancy). Envision it like this:
Divide the number of team members on-site at any given moment by the space’s capacity (or the number of people permitted to work safely)
The specialized way: A scenario-based formula with specific inputs
The only problem with the above space utilization formula is the wide variety and volume of exceptions you’ll face every time you crunch the numbers.
For example, as people return to the office in hybrid working arrangements, tenants and facilities managers feel the pain of mid-week crowding. The trend is increasing, as many workers prefer to be in the office Tuesdays through Thursdays and work from home on Mondays and Fridays. Leaders need to take into account this fluctuation to understand and solve their space utilization needs.
Another example could be a seasonal business where triple the number of employees busily occupy a space for a few months, and only a handful of people come to work the rest of the year – and do entirely different jobs on “off-months.” Or perhaps you want to measure how your highest-value resources utilize the premises as opposed to entry-level talent.
In these scenarios, you’ll need to adopt or create an equation specific to your use case, and you’ll need more targeted variables to do it.
8 space utilization metrics to track
Power up your bespoke space utilization formula by hand picking important metrics and where you weave them in. Consider tailoring the above basic space utilization equation by factoring in…
1. Occupancy load
This is how many people (not just workers but also vendors, customers, visitors, etc.) are allowed by law based on exits. This number is important to know simply because it’s a reference point.
2. Space availability
On a macro level, these metrics show how many offices in your building have leasing agreements and which ones are for rent at any given time. Zoom in to know your own space’s occupancy and availability, either as a whole or by room.
3. Space cost per square foot
The facility’s rent divided by its (usable) square footage is the cost-per-square-foot.
4. Space cost per employee
Find the cost per person by dividing your rent cost by the number of people on the premises. Similarly, rent divided by the number of employees working reveals the cost-per-employee.
5. Worker density
Multiply the number of employees intended to operate in an area by the square footage of their workstations. Note this will vary by the function of the space. So a reception area will need a different density than a conference room, collaborative workspaces, courtyard, or corridor. Experts at AQUILA Commercial offer a handy calculator to plug in a variety of scenarios for worker density.
6. Space utilization rate
Having a clear understanding of your average, peak, and optimal space utilization rate can help you benchmark success when trying to improve space planning.
7. Loss factor
Property managers at Atrium Properties advise tenants to find the difference between their usable square footage and their rentable square footage. Then, divide that difference by the rentable square footage. What you’re left with is the loss factor, which simply reveals the percentage between the two. Don’t let this number go above 40%.
8. Opportunity cost
This measurement is especially helpful for convincing other decision-makers to improve space utilization. It’s what you’ll spend in inaction. Tally up both the financial and non-monetary price paid by tenants that tolerate spatial inefficiencies.
Ways to improve office space utilization
Now that you’ve seen how optimizing your space usage benefits your team and bottom line, and because you’ve learned ways to make the analysis yours, you’re now ready to tweak your team’s actual usage to access all those benefits.
Establish goals for a more effective space
Before taking any steps to improve your space, you will first need to identify clear goals for what you want to improve. This will bring focus to your work and help identify what is (and isn’t) working. It is useful to identify specific metrics for your team to focus on and come to the table with a hypothesis around solutions that will help you improve this.
Start by creating a digital twin of your space
Once you have an idea of what needs improvement, you can document the space that you’re working with. Here is where digital twins can really change the game for your team.
There are 2 ways to build your digital twin — you can either outsource this step to professionals (the most efficient way) or scan the space yourself. We’ll briefly cover both steps here.
Book a Capture Service appointment and let on-demand professionals scan your space for you. This option is perfect for those with multiple properties and want to guarantee a reliable digital twin with Customer Success support. By making the process hassle-free, your team can focus on strategies to make informed decisions on how your space is currently being used.
Scan it yourself
If you prefer the do-it-yourself route, the Pro3 Camera is the most powerful 3D camera option that produces accurate digital twins. This accuracy will enable your team to make decisions around cleaning, repair, compliance, equipment, and space planning quickly and reliably, without having to invest time into on-site visits.
Democratize access to your digital twin
Next, share your digital twin with all relevant collaborators in order to establish a utilization baseline for your space. Improve and enhance collaboration by using these features:
Measurement Tool to provide context on the dimensions of each space on your property
Tags and Notes to add context like inventory information or ways certain spaces are intended to be used, just like adding comments in shared documents
Floor plans to support any ongoing maintenance that needs to be planned based on the current design
With this context, your team can loop in other team members, maintenance professionals, general contractors, and just about any other collaborator that will require information to help you optimize your space utilization over time. This will tailor your strategy exactly to your specific needs and reduce the back-and-forth.
Adopt and iterate to achieve peak utilization
Now, you are armed with your goals, your digital twin, and valuable context to start building an action plan.
Depending on the complexity of your space optimization effort, we recommend working in phases instead of making sweeping space utilization changes. For example, instead of rolling out efforts to everyone, test a desk booking process with a small group first, or adopt an agile or activity-based working model for a single project to see how it goes.
As you test, watch for improvements in the space utilization metrics we covered.
Allow Matterport to help you lay the foundation for better space utilization
Just one generation ago, we were analyzing badge scans and time card punches to learn how we used our office spaces. Back then, if we wanted to collaborate to improve our spatial usage, we’d give our consultants a key to the front door – and maybe a tape measure.
Today, all that has changed. You can have a digital, interactive, 3D version of your space within minutes of scanning it with Matterport’s technology. And once you have that, you can begin tracking and improving your space’s effectiveness.