According to CBRE, when it comes to office the king of the metrics for the second year running is utilization: cost per seat, design density and vacancy tied for second place.
This comes from CBRE’s analysis, 2022-2023 CBRE Global Workplace & Occupancy Insights, an annual survey of major occupiers worldwide.
“This year, 60 organizations participated in the program, representing 493 million sq. ft. (46 million sq. m.) across eight sectors,” the firm wrote. “Their anonymized responses were aggregated into benchmarking dashboards that offer 50,000 unique workplace, occupancy and space management data points to deliver industry-leading global, regional and market-level perspectives by sector and asset type.”
The number of organizations is a small sample in one sense. There is rarely anything approaching perfect data in business. But these companies have massive use and the survey, if not perfectly representational, shows the way some significant users of space now approach reviewing their investments.
In 2022, 21% of respondents pointed to utilization rates, whether average or peak, as the most important one. That’s down from 28% last year. The trio of second place answers took 15% each.
In 2021, 74% of respondents used utilization data. Last year, that was up to 89%. Also, 58% planned to increase their use of utilization in planning. In 2021, 74% of respondents used utilization data for occupancy planning; in 2022 it was 91%.
“These results reflect the increased focus on metrics that measure the space efficiencies of hybrid working,” the report said. “The importance of people density rose 27% year-over-year, while both space-sharing ratios and reservation rates spiked more than 200%. While the emphasis on the cost per seat remained steady, both design density and vacancy decreased 25%, suggesting these metrics will be less meaningful as hybrid working evolves.”
Another way of putting it is that the vacancy rate, the old standard, was a focus on strict finance and asset allocation on the part of tenants and, for the landlord, operational metrics on the other. The move to utilization is a flip. Instead of pure finance on the tenant side, operations take control. And, in a way, for the landlord, it’s gone from operations to finance, trying to understand what occupancy will mean for different companies and then balancing that against the future of net operating income.
This is a shift that has likely been a long time coming, only was sparked by hybrid and work-from-home set off by the pandemic, and likely here to stay for an extended period of time. To use a manufacturing analogy, monitoring the amount of inventory a factory produces is a valid measurement, but it doesn’t approach how efficiently the inventory is used and how well customers are satisfied. The problem, as CBRE puts it, is “measuring a plan versus measuring reality.” And reality is where the dollars and cents lie.