Office Space ROI
Staffing and real estate are the two biggest overhead costs for nearly every company. Between them, they can account for up to 25% of a company's revenue. It is essential to maximise the performance of such major investments. However, many companies aren't sure how to measure, much less maximise, the return on their real estate and staff investment.
If you understand how your workspace impacts your company’s performance, you can improve your workspace effectively. As a result, you will be able to maximise your real estate return on investment.
In this article, we'll go through the 4 major ways you can improve your real estate ROI, from operating costs to collaboration. By the end, you'll understand the impact your workspace has on the performance of your people and real estate. You'll be able to make practical changes to your workspace to maximise your real estate ROI.
Maximise Productivity
Productivity is by far the biggest factor when trying to maximise your real estate return on investment. Without highly engaged and productive staff, your company will underperform, and your workspace will cost a lot more relative to your overall costs. High staff productivity is essential to a good real estate ROI.
Wellbeing is a crucial part of improving the productivity of your people. Physically or mentally unhealthy people will perform far below their potential, reducing your real estate ROI. To improve well-being in your office, biophilic design is crucial. Biophilic design maximises the use of natural resources and materials in your offices, from natural light to wooden surfaces. Ergonomic furniture is also important. By keeping your people healthy, ergonomic furniture can create an average 25% improvement in productivity.
To maximise your real estate ROI, your workspace also needs to reflect the way your people work. By creating spaces within your office that meet these needs, you are giving your people the environment they need to improve their personal performance. Spaces that are designed around user experience will result in improved employee engagement. According to research by the Harvard Business Review, an engaged employee is 45% more productive than a satisfied worker. The better an organization is at engaging and inspiring its employees, the better its real estate ROI. To learn more about creating a productive office design, read this article.
Space Rationalisation
A crucial part of maximising your real estate ROI is making sure you don’t have too much office space. Sadly this is quite common: the average organisation has 30-50% more real estate than it needs! Many services companies based in London spend 10-15% of their revenue on real estate, so you could be wasting 7.5% of your revenue on unneeded office space!
If you have more office space than you need, then there are several options to reduce your real estate expenditure. You could find a smaller office space on a cheaper lease and relocate. If that’s not practical, you could reconfigure your existing space and turn it into a sublet space that you can rent to another company.
So how much space do you need? A good starting point is to multiply the number of staff that will be in the space at once by the amount of space you need per employee. This is likely to be around 150sq/ft. It will vary according to the size and quantity of the workstations, private offices, and meeting rooms. To learn more about how much office space you need, read this article.
Minimise Operational Costs
An often overlooked part of real estate expenditure is the operational cost of your office(s). This includes electricity, water, and office consumables. For most companies, this adds up to around 25% of your annual rent. These costs can quickly add up, so it’s important to keep them to a minimum.
When looking to reduce your office's operational costs, a lot can be done to reduce the expense without drastically changing the office. Installing a PIR system that only activates the lights in a space when staff are using it will save a lot of energy. Switching to reusable coffee and water cups will also reduce operational costs over time.
However, if your operational costs are very high, then it may be worth considering an office relocation. This is usually viable if your utility systems are very old and inefficient. For example, air conditioning often accounts for around 40% of a company’s total energy usage. Modern HVAC systems are up to 50% more efficient than systems from 10 or more years ago. This can create a 20% saving in your total office energy costs.
Maximise Collaboration
Collaboration is an essential part of maximising your company's real estate ROI. According to a study by Stanford University, teams that collaborate well are 50% more productive. As the place where your people come together, your office has a key role in enabling and encouraging collaboration.
Your office needs to be designed to help your people communicate and work together. Most modern office designs see 30-50% of the footprint dedicated to collaboration areas. Adding separate focus zones to your office will also boost collaboration.
Collaboration is not one size fits all. It happens in a wide variety of ways, with different numbers of people. To cater to this, you need to make sure your space is as adaptable as possible. Your people need an easy way to congregate and share ideas, so every collaboration space looks different. By enabling your people to work effectively together, your real estate ROI will improve significantly.
Improving Your Real Estate ROI
An office is more than just an expensive place for your people to work. At its best, your workspace can be a strategic asset that boosts culture, helps attract & retain talent, allows your people to collaborate, and helps improve company performance.
Now that you know about the 4 key factors that drive real estate ROI, you can assess them in your own office and see how you can improve them. By doing so, you'll be able to improve the performance of your company, as well as your real estate ROI.
To take the next step, read Office Design and Productivity: The Ultimate Guide. There, you'll get the full breakdown of the why, how, and what of staff productivity and office design.
To learn more about how your workspace can become a great return on your investment, read our article “What is the ROI of Office Fit Out?”. There, we’ll explain the most important benefits of an office fit out, and how these will affect the ROI of your office fit out.
