So my post earlier this week on the 3 core metrics of corporate real estate seemed to strike a chord. I got more hits from that than any normal post. Maybe it’s because it had a number in the headline? Maybe it’s because it’s superbly written? Not sure which but I’ll run with it anyway.
As a follow-up, I thought it worth putting together some additional metrics that fall out from the first three. Technically, none of those are financially focused, although controlling them does control your financial exposure as well. But there are four additional metrics that are worth tracking:
- Cost per person. The total annual cost of real estate (all in- leases, taxes, utilities, facilities, etc) divided by the total number of people that could use the real estate portfolio. This is actually more important than tracking cost per square feet. High-cost square feet can still yield a decent cost per person if space is efficiently utilized. Sometimes low-cost space is very hard to actually utilize efficiently. Higher levels of flexible working can cause this number to drop sharply.
- Cost per desk. The total annual cost of real estate divided by the total number of seats in the real estate portfolio. This is your cost of actually providing fixed real estate services. For every desk you add to the portfolio (or removed) you should see a movement of this much on the total budget. If this number is tracking up, it impacts your hard cost budget.
- Workplace Survey Feedback. If you are not annually surveying the population served by your workplaces, you are missing critical information. Does the technology support work? Are there enough collaboration spaces? Is the office falling apart? Much of real estate is highly qualitative – it cannot be measured directly. It’s important to understand that side of the equation.
- Regional Nuances. This is a bit of a cop-out on the last metric because it isn’t a metric by itself. However, all the metrics discussed above and before may vary DRAMATICALLY by geographic region. APAC will often have much tighter densities but also lower rates of agile/flexible working. The US will often have the most space per desk.
You may have noticed that I have not included the classic real estate metric that everyone seems to track religiously: cost per square foot. Yes, real estate can best be broken down into square feet and costs which would imply this is an important metric. But it isn’t important. It is a symptom of the other metrics above. You cannot impact cost per square foot directly. Negotiating a better cost on a lease does not necessarily bring down total costs. Taking fewer square feet does not necessarily make you more efficient.
Metrics should indicate the direction of some controllable action you could or should take. Pick metrics that do this and they will help. Pick sexy metrics (like cost per square foot) and you will struggle to accomplish your goals.