Oct 10, 2013

How to Determine the Best Utilization Rate for Your Building

By Don Catalano


commercial real estate utilization

A major challenge for any broker or corporate real estate professional involves commercial real estate utilization - identifying the actual use of individual rooms or spaces. Studies have shown that traditional offices have a utilization rate of 48% due to a variety of factors, including vacations, travel and sick days.


Finding the optimal utilization rate starts with a solid, disciplined process to accurately gauge spaces you have now and how they are occupied.Here are some helpful considerations for determining the best utilization rate for your real estate:

Consider Workplace Mobility

In the age of a mobile workforce, more people work outside the office – in the field, from home or other remote locations. As a result, many small and large enterprises have a utilization rate of 50 to 75%. They pay 25 to 50% more for underutilized space. This dynamic has prompted many corporate real estate directors and tenants to approach space utilization from an “as-needed" basis.


Cubicles and offices are being replaced with unassigned workspaces, “communal tables” or shared offices. Assigning space on an "as-needed-basis" offers more flexible use of the work space and utilization rates to 80% or more.


Does your workforce ever work out of the office? It's important to adapt your real estate to the age of the mobile workforce, or else your utilization will suffer.

Determine Square Footage Needed

Estimating the amount of space needed for efficient office settings can be difficult. If you have too much space, your cash flow can be negatively affected because of excessive rent payments and underutilized space. With too little space, you end up hobbling operations because you cannot accommodate staff growth.


Develop accurate space requirements for your operations by asking the most relevant questions:

  • How many workers do I currently employ?
  • Does each worker require an individual desk or is sharing possible?
  • Will I add any staff in the next few years?
  • What type of staff will be added: sales, executive or administrative?
  • What percentage of space is shared or communal workstations?

Start with a rough estimate of your space needs. Refine this number as you narrow down options and begin the process of laying out the space. Factor into the decision information on floor sizes, property amenities and loss factor.Once you calculate total square footage, add another 10 to 20% to account for future expansion.


Evaluate Process Efficiency

Process efficiency may be the most critical factor to consider when designing space. Ascertain what type of office layout is appropriate for your business, such as open spaces, private offices or a combination of both. Determine the groups or team, as well as physical resources and its proximity to other teams and resources to maximize use of space and eliminate waste.


For example, if two groups have a need for ongoing continuous communication, the best utilization would be to place these two groups closer together. Locating a copier in a distant corner of the office may seem like an excellent way to utilize unused space but can increase costs in terms of lost productivity.


How does your workforce do their job on a day to day basis? Keep this in mind when designing a floor plan that allows efficient productivity.


Use Valid Measurements

The metrics you use will determine the best commercial real estate utilization for your industry and what your organization is trying to accomplish. For example, warehouse managers may want to compare inventory to building size to gain a clear understanding of the utilization rate for their space. Law offices that require more private offices and conference rooms would increase the average square foot per worker metric. The key is to understand your layout needs and how the building will be used on a day-to-day basis.

Here are a few other articles to check out:

Commercial Real Estate Metrics That Matter

10 Amenities to Look for When Getting Office Space

8 Questions to Ask When Looking for a Tenant Rep Broker


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Don Catalano

Don Catalano