You Are Paying For Too Much Office Space
Commercial real estate brokers do not want you to read this article. Construction company CEO’s do not want you to read it either. Nor do developers or anyone else who makes his/her living by size – earning a profit on so many dollars per square foot. Architects might be loath to have me share this information – they often earn their fee based upon a percentage of construction costs. However, my concern for building smarter and more sustainably, my desire for creating “just-enough” office space, and my wish to create higher quality spaces in which people work compel me to share this information.
In the past 24 months, I have worked on four office projects that easily could have been one-third smaller in square footage than what their leases called for. This size reduction translates into a potential total savings of millions of dollars for my clients. Unfortunately, two of the four companies had already signed leases before they contacted me and were then put in a position of trying to sublet or otherwise rethink their approach to excessive office space. One other was able to use a smaller footprint, saving significantly on renovation costs, and the fourth client was early enough in the process that we could right-size their new building. Three of these four buildings were new construction.
Why are companies signing on for more space than they need? It is because they are basing their numbers on an antiquated way of working. Often, when calculating space needs, a company leader notes the square footage number in his existing lease, estimates how many more employees he may be hiring over the next five to ten years, increases the square footage number proportionally and then goes looking for a larger-sized space. However, when you signed that lease five, seven or ten years ago, work looked different than it does today.
Today, your employees are more mobile; they do not need the same office configuration that they have had. Often, every person in a company, whether the CEO or on the lowest rung of the ladder, requires very little physical space to do his/her work at a desk or computer. (There are exceptions for certain types of work, but even architects and contractors who work with large-sized drawing sheets now use multiple monitors to review digital drawings.) This does NOT mean that you should create an ice-cube-tray-styled work environment with 36 square foot cubes in row after row.
People are less tethered to their desks and are more apt to roam to other, more pleasant naturally-lit spaces to do their work. Consider that one comfortable lounge chair, with a small pull-up table for a laptop, requires less than 10 square feet – a 73% space reduction to complete a required task.
Many employees are participating as remote workers or spending less than 50% of their time physically located in the office. If you consider a different way of working – something called activity-based-work (ABW) – you can create a space that will accommodate more people in less space. Importantly, space utilization calculations indicate that workstation utilization averages 40% and private office utilization averages 23%. That means that 60% of the time, no one is sitting at his/her workstation. 77% of the time, a private office is empty. Here is the key point with this different way of working: employees can work in higher quality, more comfortable spaces, and be more productive at work. This is a win/win/win scenario: smaller overall building or office size leads to tremendous savings on overhead and real estate, more innovation and productivity and higher employee engagement. Brokers and others in the building industry may be disappointed that you are taking less space, but you will be a hero in your company if you right-size your space needs before signing that next lease.