Organizations worldwide face the challenge of balancing real estate costs with the selection and utilization of facilities in a manner that best contributes to their mission. Often unpredictable macro- and microeconomic factors exacerbate this challenge.
A facility leased two years ago on a five-year lease might not meet the occupant organization’s target space utilization rate of 85% if the organization cannot meet its hiring targets. Lease costs for the unused space now represent a sunk cost if the lease cannot be renegotiated without penalty. Similarly, a facility that meets the location and gross area requirements for a move from one campus to another might require extensive refitting that could delay the move beyond an acceptable timeframe. These examples describe just some of the challenges facing corporations as they make facility selection and occupancy decisions to execute on larger corporate objectives.
Research conducted by CBRE (see Figures 6 and 7 in Appendix) provides insight into how difficult the challenge can be to maintain a high level of space utilization and lower the amount of unused space. Figure 6 shows the average percentages for various stages of occupancy in six major countries around the world. The data indicate that the average percentage of completely empty space across all the countries studied is ~40%. All else being equal, this means that 40% of space being paid for is producing no return on investment!
Figure 7 in the Appendix provides further insight into space utilization by industry for the same six countries researched in Figure 6. Some empty space identified in these industries can plausibly be attributed to the unavoidable need for assigned permanent space (e.g., business consultants who often hold offsite client meetings, but still need space to do paperwork). However, such large percentages of empty space highlight the need for well-planned space selection and occupancy allocations that can contribute to productivity and substantially lower overall cost of occupancy. How can this be achieved?
The answer lies in strategic space planning.
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