The 3 core metrics of corporate real estate.

There are three classic metrics used to evaluate the “efficiency” of a corporate real estate portfolio:

1. Occupancy Ratio: Square feet per person: the amount of space in the portfolio divided by the total number of employees and contractors. In a traditional one person to one seat workplace, this will always be higher than the Density Ratio because you will always have more seats than people. Agile/Flexible workplaces try to drive this number well below the Density Ratio.
2. Density Ratio: Square feet per seat: the amount of space in the portfolio divided by the number of seats available for people to work from. Hard to move too much because you need a certain amount of space in an office but generally targeted in the 150 to 250 range depending on region and type of office. It is possible to go tighter but that can lead to productivity issues.
3. Utilization Ratio: Seats per person: the number of seats available divided by the number of people that occupy those seats. Traditional one person to one seat workplaces would target occupancy in the 80% to 90% range with many thinking 90% may actually be too much to account for churn and growth. Going over 100% means that you have more people than seats and can be a really good thing.

These metrics are extremely flexible because they can apply to a single location (small or large), geography, or even to the entire portfolio. They can tell you where you “most efficiently” use space and where you are “least efficient.” Anyone who has worked even a week in real estate instantly recognizes good targets for each. If that person has been around for a year or so, they can even tell you the benchmarks for each by region of the world (culture plays a huge role in real estate metrics).

Plenty of people quibble about whether square feet should be usable or rentable or something in between but the reality is that it doesn’t really matter. As long as you are consistent with the measure you use, you’ll get a result you can work from.

The single biggest difference in how companies use these metrics is the type of workplaces they have:

• Traditional workplace: one person to one seat. Utilization ratios approaching 90% mean that more space is needed to accommodate growth.  All of your measures become very straightforward because you know your people, you know your assigned desks, and everything else is just calculated from there. Typically, future workplaces simply try to better enable to employees assigned within the four walls of that site.
• Agile/flexible workplace: more than one person to a seat. Utilization ratios around 90% mean that the facility is being used entirely wrong. A typical Utilization ration in flexible working would by at least 120% and can even begin approaching 200+% as people get used to it. In this model, calculations of metrics for a given site can get a bit trickier as you now regularly have people who may be assigned to the site that never actually come in.

The targets and uses of these metrics will and should change by organization and geography. But these are the three metrics that are most fundamental to CRE – on either the corporate or service provider side. Get the direction of these right and you will find your portfolio improving. Never set a target or direction and you will have a real estate group struggling to understand their mission.