Cost Versus Value in Corporate Real Estate
By Joan Meyers
As more companies move from dedicated seating environments to free address or mobile arrangements, questions about space utilization and cost can quickly become a greater focus. But cost alone should not overshadow the value that the right space can provide occupants. Over the years Gensler has used a variety of technologies, methodologies, and analysis methods to inform real estate and workplace strategies from both a cost and value perspective. Along the way, we’ve developed best practices and guidelines for data capture and analysis that have been applied to workplaces around the world. Gensler recently presented on this topic at the IFMA World Workplace Conference in Denver, Colorado and will be sharing it as part of a three part blog series.
“How and when is our space being used throughout the day?”
When planning a real estate strategy, questions about space utilization arise early on in the conversation. According to a Gensler research study, 83% of corporate real estate executives rank space utilization as the most important metric for making effective workplace decisions. However, with workplaces shifting from dedicated seating to free address environments, utilization data only provides one piece of the puzzle. Utilization addresses when a space is used, and supplementing that with how a space is used can create a broader picture, representative of both the cost and value of corporate real estate.
Cost v. Value
In essence, a workplace strategy is the alignment of an organization's work patterns with the work environment to enable both spatial and employee performance while reducing cost. These strategies often involve conversations around the cost of space versus the value of space. When the focus is on cost, conversations tend to be about density, square footage, energy consumption, and occupancy costs. When the focus is on value, conversations tend to be about efficiency, productivity, retention, and satisfaction – considerations that are more human than tactical. It’s key to understand the kind of conversation you are having about space and to consider what’s most compelling to the C-suite.
Space utilization data is particularly relevant to the cost side of the discussion. Utilization refers to how often spaces are in use over a given period of time. If every square foot of unused space is costing an organization money, then knowing how much you’re using—or not using—can create big opportunities for savings. With more organizations moving from dedicated seating to free address, agile, or mobile type spaces, there is no one-size-fits all ratio that will apply to every scenario.
In dedicated seating environments with single desk-per-person spaces, we’ve found that the average daily peak utilization is 55%, but the average daily utilization is only 45%. This might sound low but it is actually normal. With a natural rate of absenteeism at around 15% and around 20% of the onsite population actually offsite during any part of the day – at a training session or out to lunch; or even in the restroom, walking down the hallway, waiting for an elevator, etc. – that puts utilization at around 65%. Then consider that only about 80% of those people will actually be at their dedicated seat during peak time, and you’re left with 45% utilization.
Making sense of utilization data in free address environments is not as simple as in dedicated seating environments. In our experience, the average target utilization for free address types of environments is 95% or higher. This is because in free address environments, the aim is for every seat to be used at least once per day. Targeting 95% instead of 100% utilization will allow people to find a place to work without too much difficulty on the days when attendance is high.
When looking at different departments, the utilization targets would be the same; however, the sharing ratios may be vastly different. This is where additional data needs to be considered. For example, most companies want their sales team to be out on the road, bringing in business. The sharing ratios for this type of department would be higher than for the marketing or accounting departments, which are typically in the office more often.
Adding value with activity data
We’ve found that after a utilization study is complete, the next questions that arise are about the activities taking place in a space: Is the space being used as it is designed or intended? Are people working on their computer engaged focused work? Are they on the phone? Are they eating at their desk?
These questions relate to how efficiently a space is meeting the needs of the occupants, which is tied to the value that a space can create. Understanding how space is currently used can help inform a workplace strategy that optimizes space, without necessarily increasing the amount of space it has.
Capturing utilization and activity data
If one wants to capture both utilization and activity data, where do you begin? In recent years there’s been a flood of new technologies and techniques for capturing data: sensors on walls, desks, or in chairs; surveyors with clipboards or tablets, self-reporting, badging, surveys; and more. All of these can be divided into three buckets of data collection methods: observation, passive, and interactive. This is the first of a three part series, and in the second post we’ll discuss the benefits and challenges of the different methods and how the data can be combined. We’ll share lessons learned and best practices for getting the most value out of your study.
Once a study is complete, the next step is to consider how the data should be analyzed and used. Stay tuned for the third post which will cover the different ways to utilize the data you’ve captured. We’ll walk through case studies for different scenarios in which real clients apply and leverage utilization and activity data to inform their strategy.