Why use metrics in Real Estate asset management?

Does anyone imagine having an ecommerce without metrics? Or managing a business without KPI? Or making a strategic plan without stablishing specific and accountable goals from the beginning? Surely NOT, so if we can’t manage our businesses without KPIs, why facility managers or space designers don’t use metrics in Real Estate asset management?

Can anyone imagine this kind conversation between the CEO and the CMO?

    • CEO: how was the Christmas’ Campaign done?
    • CMO: well.
    • CEO: Just well? How much have we sold? Have we increased the number of clients or the average ticket?
    • CMO: I don`t know exactly, we have not measured it but there are good vibes.

Somehow it was invented, but just somehow.

Remember the adagio: “you can’t manage what you don’t measure”. It applies to everything, even physical spaces, especially if your business in based on it, an expensive asset that you should squeeze.

Let’s talk about workplace management and why you should use space analytics KPIS

Historically, companies plan their offices according to the number of employees and usually using a 1:1 workstation vs. employee ratio. But as we explain in this article about Acitivy Based Working, nowadays there are new ways of working that, among many other advantages, may reduce this ratio, and thus, the needs of space.

Did you know the cost per employee at your office? Depending on several variables the average cost per employee is:

CITY ANNUAL COST PER EMPLOYEE
MADRID 6,500 €
BARCELONA 5,000 €
LONDON 27,100 €
PARIS 13,500 €

(*) Data from Cushman-Wakefield Global Occupier Metrics

These average costs mean that for a company, the office rental fee, depending on the number of employees assuming a 1:1 workstation per employee, are:

CITY 10 employees 100 employees

1000 employees

 

MADRID 65,000 650,000 650,000,000
BARCELONA 50,000 500,000 500,000,000
LONDON 271,000 2,710,000 2,710,000,000
PARIS 135,000 1,350,000 1,350,000,000

Office cost depending on the enterprise size.

But what if you may reduce the area for employees in 40% because your peak occupancy never goes up 60%? Would you bet on it blindless or just based on gut-feelings? Of course, no, you shouldn’t.

Nevertheless, by adding some metrics to the facility management analysis could help managers take decisions in order to increase performance of their spaces and reduce rental and operational costs. And that is why technology exists: for helping business being more efficient and taking better decisions.

KPIs of a workspace

Let’s see it with and example: this is the KPI obtained from your office, where the average use is 58.7% on this month.

The peak occupancy is shown as a “heatmap visualization” with actual data behind it,

  • Occupancies over 75% represents 4.6% of all the time and 9.2% of working hours.
  • Occupancies under 75% are 95.4% of all the time and 90.8% of working hours.
  • Occupancies over 60% are the 20% of the working hours.

With this data, we could reduce office area in, at least, in two ways depending on our preferences or our human resources policies:

  1. In average, we can reduce 40% of our rental space and redesign other spaces to fit peaks (20% of the time).
  2. Reduce our rental spaces about 25% and redesign other spaces to match peaks for 9% of the time.

And it isn´t weird, because you have a straight impact on your P&L as you are reducing your costs as follows:

CITY ANNUAL COST PER EMPLOYEE 10 employees 100 employees 1000 employees
MADRID 2,600 € 26,000 260,000 2,600,000
BARCELONA 2,000 € 20,000 200,000 2,000,000
LONDON 10,840 € 108,400 1,084,000 10,840,000
PARIS 5,400 € 54,000 540,000 5,400,000

Office costs: 40% of savings by reducing office underutilized rental area

Conclusions

The workstation´s cost per employee is one of the highest expenses for companies but usually companies don`t know how employees are using those spaces, either if it could be possible to reduce rental area.

Analyzing employee’s behavior will help companies understand how they interact, how they use the space and, thus, they could manage their spaces with metrics that help them increase their performance.

If Facility Management could manage their spaces as other business unit managers do, they could have more power to take decisions based on data and reduce operational costs.

So, next time you are planning your office space, think about it: do you need as much area as you think? It is about employee´s comfort, productivity and well-being but also about business. Resources are limited so it is our responsibility using them smartly.