Why you need to know how your commercial real estate is used

Even before the pandemic emptied offices, commercial real estate (CRE) had vacant space.

Now, the dynamic needs of tech-driven hybrid environments bring with them a unique set of workplace necessities, which can make understanding space utilization particularly challenging, especially without good data.

Because employees are using the office on different days with a variety of work styles and project types, workplaces must be as varied and enterprising as the people in them. This creates a fluctuating workspace that cannot be fully appreciated by just looking around. 

Workplaces must be as varied and enterprising as the people in them.

What may seem like a lack of adequate space could actually be a matter of underutilization. 

Before you sign a new lease to expand your commercial real estate portfolio, be sure you understand exactly how your current space is being used, and whether the right choice is more space or better-utilized space. 

Bigger is not always better 

Managing and optimizing CRE is a matter of balancing how much space you have with how that space is being used. As a bottom line, outdated areas that do not deliver the tools, comfort, amenities, and overall experience that is expected of them will remain unused. 

When one area is underutilized, there is overcrowding somewhere else, which can seem like a lack of sufficient space. If more square footage is added but not optimized, there will be more misallocated areas, starting the pattern over again. 

To break the cycle, you need to understand what people value in their workplace so that you can design spaces that better suit their needs. 

Designing the hybrid office 

It’s not hard to see why hybrid work has changed the physical demands of a workplace: People have shifting schedules, they collaborate in new ways, work from multiple locations, and the office is one part of a bigger employee experience. 

In a very fundamental way, it all boils down to a type of flexibility that was not prioritized in old neighborhood and allocation designs. 

The office is one part of a bigger employee experience. 

Employees want the freedom to work how they want, and an office that is designed for hybrid work will offer space that facilitates whatever they need to accomplish. That could be formal collaboration in a conference room or spontaneous brainstorming in an area with soft seating. 

It could be dedicated soundproof booths for heads-down work or a relaxing outdoor space where people can gather their thoughts before an important presentation. The key to this kind of new flexibility is variety. 

But with that variety comes more complicated designs and utilization metrics. The office is being reimagined as a destination that supports culture and well-being, prompting a range of spaces and support systems. The very nature of which can mean spaces are being creatively used for multiple purposes in a single week or even day.

While this is pivotal for enhancing the employee experience, what is going on at any given time is not an accurate sample of big picture usage. At the same time, if you don’t design spaces that meet these fast-changing requirements, they will remain vacant. The question then becomes how can you understand your space in a way that allows you to maximize design efficiency against such a complicated backdrop? The answer is data. 

The details of utilization  

As is the case with most things, the more information you have, the better decisions you can make. This is certainly true for something like signing a new lease. Without obtaining detailed metrics like occupancy, traffic patterns, hot spots, and points of congestion, trying to manage space utilization is a matter of perception. In other words, you are guessing usage based on how “full” a space “feels.” 

But amid the shifting hybrid landscape, there are simply too many variables to accurately understand space this way. The future of workplace optimization is measurement. 

The more detailed the metrics, the more successful your optimization efforts can be. Traditionally, space was understood through vacancy. What is being used and what isn’t? And although in a very simple way that is still worthwhile information, data tells you the most important thing of all: Why is space underutilized?     

Data tells you the most important thing of all: Why is space underutilized?     

Without knowing the reasons behind occupancy patterns, you are back to making guesses about how your space is being used, unable to concretely know if more space is the right answer.

The actual utilization rate across industries averages at 60%, while surveys show that the majority of companies are aiming for something between 70% and 89%. That means that in most cases, there is an opportunity to make existing spaces perform better, and the room that is needed is not for expanding but for improving. 

Data and real estate management 

Gaining a deep understanding of why space is underused is much different than just measuring a percentage of vacancy.

For example, there may be two conference rooms on a floor with slightly different layouts and tools:

• The first might have a bigger table with more seating and newer tech for video calls.
• The other might be situated in a quieter part of the office and have blinds that can be closed.

As the nature of tech-driven collaboration has become vital in the hybrid age, the first room might be frequently at capacity while the other is only occasionally occupied by individuals. And it would be easy to misread the situation as a simple vacancy issue. 

But there is a fundamental problem with this kind of observational thinking. The story of a building is more complex than that. 

A more realistic view of your space

What seems like a matter of space may actually be a matter of design.

In the above example, the second room, although appearing vacant, may be a vital place for people who have a hard time finding a distraction-free space at home and who need an area for heads-down work in the office.

Yes, the second room is underutilized for conferences, but it’s an issue of function. And for a private workspace, it might be overutilized (as a room that is designed for multiple people is only being used by one individual at a time). 

What seems like a matter of space may actually be a matter of design. Without data that lets you analyze that, an important point about the spatial needs of employees would be missed.  

Optimization makes more space without expanding 

At the same time, this scenario may seem to require more space. Either for teams that want to use the first room and often find it full, or for individuals who are looking for closed areas to focus and find there aren't enough for their needs.

As a result, both teams might petition for expanded space, and without data, knowing if those requests are warranted would again be reduced to best guesses. 

Read more about reducing the politics of your decision-making here.

You need metrics to make smart real estate decisions based on exactly how space is being used, not how it appears to be. In the end, you save space, create a better workplace experience by equipping people with the precise tools they need to work productively, and avoid expanding and acquiring new real estate that may very well still suffer from the same utilization issues as your current building. 

The importance of a dynamic workplace

Of course, the above example is overly simplified. No commercial real estate consists of an office with only two rooms. In reality, data will reveal the dynamic needs of large teams working across big spaces, and how flexibility can be designed to suit a diversity of work styles. You need to be able to A/B test designs and equipment to orchestrate the most effective layouts. 

Space utilization data will tell you that a conference room is crowded because it has the most current communication tech, or that visual privacy is important to people who want to focus. With that information comes smarter decisions that help you make better spaces.

On the other hand, data will also tell you when expanding and signing a new lease is the right choice, and the information you have from testing your current space will help you optimize your designs for the future. 

Watch how Okta is using data to redefine its workplace and real estate strategy:

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Data makes the world more sustainable

The global building floor will double by 2060. That is the equivalent of adding a New York City to the world every month for 40 years. It’s not a coincidence that 40% of CO2 emissions are attributed to real estate. 

In the conversation about space optimization, thinking about the impact your business has on the world is part of the dialogue. But it’s not just a matter of being sustainable. Many leading organizations are taking a proactive stance on finding ways to be green. Staying relevant in the market may mean adopting those operational principles. A recent article Forbes notes that “astute investors are exploring the implications of climate change on their portfolios.”

In a way, reducing the carbon CRE footprint starts with space utilization data. If every building employed sophisticated utilization metrics to optimize its space (going from the 60% actual average to the 90% goal), a huge amount of space could be saved, preventing the need for an ever-expanding footprint and reducing the global emission rates. 

For companies concerned with the triple bottom line — people, planet, and profit — investing in detailed utilization data optimizes their spaces while reducing their carbon footprint in a responsible, sustainable way.

Your team, your space  

Knowing how much space you need isn’t always as binary as using metrics for space utilization. Every organization, team, and employee has a unique set of goals and needs, and the right amount and type of space will not be the same from organization to organization.

Employing metrics saves money and space, but it also improves the workplace experience. It’s a way to get to know more about your spaces and the teams that use them. 

There is no formula that dictates exactly how much space you should or shouldn’t have. But by thinking about space as more than just quantity, and recognizing how it is used and who is using it, you can design better spaces.