Space & Move Management

What does occupancy rate mean and how can you improve it?

Karina Wright
March 29th, 2022

Tracking and improving their occupancy rate is one of the simplest ways companies can create a more efficient office space. Especially when they couple occupancy data with space management best practices, they can ensure they are getting the most out of all the available space in their real estate portfolio.

In fact, better occupancy forecasts can even help companies reduce the size of their portfolio. This can lead to cost savings as well as a smaller carbon footprint.

In the following article, we explore how and why to track your occupancy rate. We also review how to use occupancy rates combined with space utilization data to create a better office. 

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What does occupancy mean?

At a basic level, the term occupancy is about the act of occupying a space over a period of time. Whether that’s a desk, a hotel room, a rental unit, a home, or simply your spot in line.

It’s when they start to track occupancy, by recording their actual occupancy rate over time, that organizations and facility managers (FMs) can begin to make better, data-driven decisions for their workplace strategy

What does occupancy rate mean?

Sometimes referred to as ‘percent occupancy’ or ‘space occupancy rate,’ your occupancy rate is what it sounds like. It’s a measure of your actual occupancy, for any given time. 

Specifically, occupancy rate refers to the amount of space you actually use/occupy in your office building or other corporate real estate, compared to the amount of space you own/lease. It is typically measured in people per square footage. Your occupancy rate shows you how much space you’re actually using, versus how much space is left sitting unoccupied. 

In other words, this figure gives you a clearer picture of how much wasted space is in your portfolio. This makes it critically important data for successful facility planning. It also makes it a core key performance indicator (KPI) for your real estate.   

Given that real estate costs are usually among a company’s biggest expenses—up to $14,800 per employee per year in New York—knowing if and where they can cut back on space can dramatically improve cash flow. 

And given the amount of energy and resources that go into building management, cutting back on space also has the potential to dramatically improve a company’s carbon footprint. 

“I’m a heavy user of occupancy and headcount reports. I run the Occupancy — By Location report twice a month to get a snapshot of how many seats, cubes, and rooms we have vacant to accommodate for new hires. I used to manually create these reports in Excel, but I could never pull them together as quickly or accurately as I can now with OfficeSpace.”

Scott Moitoza, Senior Director of Real-Estate and Facilities, Procore

What industries collect occupancy rate data?

The hotel industry closely follows occupancy, perhaps more than anywhere. Companies in this industry closely watch vacancy rates across their total number of rooms. For example RevPAR (revenue per available room), is one of the most important KPIs when tracking a hotel occupancy rate and hotel performance. 

Similarly, hospitals also closely track length of stay across their number of available rooms (occupied rooms). 

Finally, when it comes to the office, virtually every workspace can benefit from collecting good occupancy data. Especially when they combine it with other relevant data. 

occupancy data

Combining space occupancy with other data

Yes, your space occupancy rate can give you an idea of whether you have too much—or not enough—office space. But alone, it’s not enough to give you the clearest picture possible of how workers are interacting with your space, so that you can make better real estate and strategy decisions. 

You might have high occupancy rates, for example, while still having several underutilized spaces in the office. Or you might have a building that is about to run out of space, despite having conference rooms or quiet zones that employees barely use (low occupancy rates). 

In short, simply collecting data on your average occupancy rate alone isn’t enough. You must also gain insight into how your space is serving employees or whether it’s fostering good collaboration in the workplace. This is especially critical as companies experiment with different hybrid work models and new work environment types to create a better return to the office

Space utilization and headcount planning

Occupancy rate is just one benchmark of office space utilization. Space utilization refers to the analytics of how people are actually using the space they’re occupying.  It’s when you know your occupancy rate, and can combine that with full space utilization data, that you start to provide comprehensive and effective facility management. 

For example, this can look like being able to more effectively do headcount planning. This is especially important for today’s distributed workforce. 

Or it can look like seeing that your phone room has an unexpectedly small utilization rate. Therefore, you can tell that it might be better as an open working space.  

Ultimately, space utilization is about what workplace strategist Angie Earlywine, Senior Director in the Total Workplace division of Global Occupier Services at Cushman & Wakefield, refers to as making office spaces that are ‘fit for purpose,’ which she says is of central importance in creating a better hybrid workplace experience

“Figuring out that recipe of what to give to each team and how that’s appropriated in the workplace is complex,” she says. “One of the most important things we have to do as workplace strategists is figure out what is fit for purpose, down to the team and down to the individual and how does it align to the short and long term goals of the business.”

Of course, this is complex work. So much so that many workplace strategists refer to optimizing occupancy and space utilization as more art than science. That’s why it’s best to handle them with leading edge space management software that does all the heavy lifting of collecting and analyzing data for you. 

“If it’s not fit for purpose, down to the team level and down to the individual, you could be misappropriating funds, resources, space, and technology.”

Angie Earlywine

How to calculate occupancy rates and space utilization rates

Your occupancy rate formula is fairly straightforward: simply divide your occupied square footage by your unoccupied square footage. 

Calculating your space utilization gets a little more challenging, which is where good space management software really comes in.  

First, you need to identify what utilization rates matter for your end goals. Will you track desk usage? Conference room usage? Where office neighborhoods tend to congregate? Does your office support your new hybrid workforce?

Once you’ve determined which metrics are important for your goals, you can ensure you’re getting the right reports and analytics from your space management software. This provides a bespoke window into your workplace.  

From your new vantage point, you might see that there are underutilized areas of the office. So perhaps you need to rethink your agile working strategy.

Or maybe thanks to your new activity-based working strategy, you’ll see there’s not enough private cubicles to go around. This would be based on data that shows where employees are choosing to check in each day. 

Ultimately, by using the tools we’ll cover further below, you can collect the data you need to better improve how you’re using the three basic elements of space management (i.e.: space planning, implementation using the right tools, and space tracking).

In turn, this data can help you understand if you need to adjust your hybrid work schedule. It can also let you know if you need to offer more—or maybe fewer—flexible seating options.  

New space considerations

Before the pandemic, when organizations looked at their occupancy rate, they were mostly thinking about how to maximize their space utilization. Today, of course, the need for social distancing adds a new level of complexity to this process. 

Namely, the required space per employee has changed dramatically.

Pre-pandemic, companies could simply let the type of work an employee was doing dictate how much square footage they needed. A creative employee in a coworking environment might need 150 square feet. But a phone-based sales rep might need a lot less space. But now there are more health and safety concerns to take into consideration. 

This means the office space now needs to account for both how much space employees need to do their actual jobs, and how much space they need between each other, to maintain social distancing. And note that even if there are no official mandates about social distancing, we can likely expect individual employees to remain cautious about their space for the foreseeable future. 

Distancing Planner

“We are all going to bring a certain level of anxiety with us for a little while around personal space,” says Earlywine. “So densifying a conference room or cramming people into a training room is probably not going to be the social norm for a while. Remember we all spent two years social distancing, that doesn’t change overnight.”

“Distancing Planner made our office re-opening strategy so much easier. The tool instantly generates socially distanced floor plans, which really helped us for sites where we have unusual seating arrangements. We’re going to be using Distancing Planner to make the best use of our reduced capacity.”

Randy Peterson, Senior Direcor of Real Estate and Facilities, AllianceRxWP

For this reason, companies can benefit from a tool like Distancing Planner, that essentially does this work for them. It instantly generates seating plans that allow for as much space and distancing as required. 

benefits of using data

What are the benefits of using space occupancy data?

Having in-depth space occupancy is as critical for enterprise facility management as for small companies. 

If you’re not using your space wisely, then you’re not using it in a cost-effective manner. This process is about making the workspace fit for purpose. It can lead to real estate savings, but it’s ultimately about supporting workers and fostering a better work environment. 

“If it’s not fit for purpose, down to the team level and down to the individual, you could be misappropriating funds, resources, space, and technology,” says Earlywine

Having this data can help FMs and workplace leaders make better informed decisions that benefit everyone. You can only be sure of the right solution when you have a good handle on the problem.  If people fight over desks, maybe that means you need to offer more desks. Or rework your agile working strategy. Or simply invest in better desk booking technology. 

Space occupancy examples

Specifically, there are many ways to use space occupancy data to create a better office space.  For example, it can help companies:

  • Manage limited occupancy, including determining how many people can safely use a shared space—critical given our new health realities
  • Determine if your company has too many individual workspaces, especially helpful in a free address workplace
  • See if the company is underserving departments with regards to office space
  • Get a better picture of which conference rooms employees are using and when, which in turn can help inform plans to host more—or less—hybrid meetings

Simply put, space occupancy data gives you a birds-eye view of your workplace. This provides the insight to see where there’s a discrepancy between resources and need. And being able to identify issues before they become actual problems is one of the best ways to future-proof your office. 

“It’s incredibly important for me to be able to check the density of each of our offices in real-time—what’s occupied, what isn’t—because I’m not able to be in every location. So when I have a question like “What’s the situation in Tokyo?,” I can go to OfficeSpace and get the answer in seconds.”

Bernard Morrissey, Chief Officer for Real Estate and Facilities, K&L Gates

For all these reasons, collecting space occupancy data should be at the top of every forward-looking facility checklist

how to collect and use data

How to collect and use occupancy rate data

Clearly, workplace analytics are the backbone of any successful facility. It’s best to collect these types of analytics with an Integrated Workplace Management System (IWMS).  

When FMs have access to good space utilization and occupancy rate reports from their IWMS, they are in a better position to make the well-informed decisions we’ve covered. 

IoT sensors can also be especially helpful for collecting occupancy data, especially in a free address workplace. 

When this data is combined into actionable reports, FMs can use them to:

  • Gain insights into critical workplace metrics like cost per employee, occupancy, and operational costs
  • Combine real estate costs with their occupancy rate to better understand their budget and where to build in benchmarks
  • Understand department behaviors, and whether individual departments have the right types of spaces to meet their needs
  • Determine if they’re meeting the seating needs of their employees, whether they’re in the office every day or part of the hybrid workforce
  • See which space types are most popular with employees, and make decisions to modify the office as necessary
  • Continually configure office neighborhoods to better serve team members
  • Better understand their space requirements, so they can adapt as needed—and never have to worry about suddenly running out of space
  • Provide better better and more intelligent move management

Occupancy data and the hybrid workplace

Given these many applications, using occupancy data is at the forefront of managing the suddenly new hybrid workplace. The reality is that it takes time to develop a workplace strategy and to get flexible working right. Some amount of trial-and-error is to be expected. But with the right space utilization software, FMs no longer have to rely on their gut alone to make decisions for the office. 

“Even though it’s been two years of remote work, we haven’t had long to truly test the hybrid workplace experience,” says Earlywine. “So it still feels like a knee jerk reaction to just start reducing real estate without looking at the data and employee experience first.”

“Knowing who’s using our offices, having good data on occupancy, good data, and utilization, that’s going to be critical as we fine tune the portfolio on the other side of this. And I can’t imagine how you would do that without a tool like OfficeSpace.”

Patrick Hoffman, SVP of Corporate Real Estate and Services at Syneos Health

Simply put, FMs can save money, effort, and time when they have data. It’s what helps them understand what needs to be changed, and how best to change it. 

good occupancy rate

What is a good occupancy rate? 

There is no one good occupancy rate across industries. 

If you’re a real estate investor, you might care about the vacancy rate of a potential investment. While if you’re in charge of a hospital occupancy, you might be focusing more on bed occupancy and revenue management. 

If you’re a hotel owner, you’re likely more concerned with your average daily rate (ADR). Or knowing what number of units you need to create a high occupancy rate.

But if you’re managing people, whether that’s in a large distributed workforce or a small team in a small office, then you need to look holistically at how you’re using your space. There is no one good occupancy rate that works for every team. A good occupancy rate is ultimately one that lets you keep your workers as happy, safe, and engaged, while also keeping real estate costs as low as possible. 

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Find the best hybrid model for your office

OfficeSpace can help you collect and use your occupancy rate to improve your office space. Reach out for a free demo. 

Photos: SolisImages, eclipse_images, Towfiqu barbhuiya, Headway, Hispanolistic