Excess office space and idle desks cost millions

It's important firms get office density rates and desk space usage right. Photo / Supplied

Many Auckland city occupiers are misjudging how much space they need, potentially costing them millions of dollars and major losses in productivity, says Chris Dibble, research and communications director for Colliers International.

"Faced with tighter office leasing market conditions, occupiers need to limit their future rental costs as much as possible," Dibble says. "This is best done by understanding how much space they need to occupy – but for many this is the biggest leasing mistake they make."

He says Colliers' latest Auckland CBD office occupational study, recorded an increase in density or a decrease in space per person from 18.1sq m per person in 2016 to 13.5sq m per person in 2018.

"This has been a significant shift in just two years, highlighting that many occupiers are 'right-sizing' and are significantly reducing their overall footprints and costs."

Dibble says new buildings are assisting in this transition, but many buildings and organisations could comfortably reach 12sq m per person.

"For a 200 staff organisation in a prime Auckland CBD office, an increase in density of an additional 1.5sq m per person could mean almost $1.5 million in savings over a 10-year term, based on an average prime net face rent of $486 per sq m. Reducing the occupancy ratio to 10sq m per person could lead to an extra $3.4 million in savings."

"Density rates at 10sq m per person are approaching a more natural rate of efficiency and office occupiers who surpass this density can forego benefits achieved in staff productivity, retention and talent attraction."

And, it is not just rent to consider. The Colliers' study also highlighted that gains in total occupancy cost (operating expenses, car parks, etc) could be achieved.

"Occupiers moving into new, higher specification, technology-driven premises experienced significant gains in occupancy cost per person despite having to pay more rent per square metre. "Auckland CBD office total occupancy rates per square metre increased to $590 per square metre in 2018, but total occupancy cost per person decreased to $7979 per person."

Dibble says many organisations have massive periods of idle desk use, with some organisations that Colliers has surveyed having up to 45 per cent vacancy periods a day.

"Global studies show many businesses face 40 to 55 per cent idle desk space. Not all businesses will be able to combat this but undertaking desk utilisation studies can help measure actual space requirements. These studies could also be more than just a cost control measure, unearthing the ability to adopt new working philosophies like agile working or assist in change management requirements."

Dibble says it's important that firms get office density rates right, but it's also important not to go too far in the other direction, hoping that open-plan layouts and squeezing employees into smaller spaces will work.

He cites a study by Oxford Economics, in association with Plantronics, which surveyed 600 executives and 600 employees and found that the highest-ranking requirement for their work environment was the ability to focus and work without interruptions.

"This is not always available in poorly considered, high-density open-plan spaces," says Dibble. "A recent Harvard Business Review study also found interaction and collaboration doesn't necessarily increase in these environments but can actually have the opposite effect.

Dibble says data-driven occupation strategies are rising in popularity among landlords and occupiers to more quickly and accurately optimise office space usage; identify space for bursts of high utilisation; employ the best working philosophies as well as boost staff productivity and wellbeing.

"With market conditions forecast to remain tight over the next few years, focussing on right-sizing and best practice space utilisation is likely to be the future of office leasing and will assist in avoiding the biggest leasing mistake."