Benchmarking Your Space Utilization (Part Two)

Note: A similar article on Space Utilization was published in November 2011. We address the differences below.

Most CREs and FMs have difficulty getting started in the benchmarking process. The press of daily issues and problems often keep the benchmarking initiative from beginning. Also, without good comparisons you don’t really know if there even is a problem. Finally, regardless of what benchmarking program or tool you use, the task often looks formidable. Sometimes the input forms look like a tax return—nothing anyone really wants to volunteer for unless they have to.

Here is a suggested approach to help you to get started. We have used examples from FM BENCHMARKING to illustrate how easy the process should be and this approach will allow you obtain the key output reports in the minimum amount of time.

First of all, focus on what is important. Since most organizations still are getting requests to cut budgets, sometimes year after year, let’s start first with space utilization. Why? You can cut 10-20% from the operating budgets in utilities, maintenance, janitorial, and security and you will save some. But get rid of some space and you will save 100% of the operating costs for that area, not to mention the space reduction. That is why we want to be sure all the space an organization has still is needed.

FMs also know that hardly any organization will “volunteer” to give up space. That is why you have to show good benchmarking comparisons and gather support for eliminating space. The usual reaction is, “We can’t cut it any further without making our employees unproductive.” The reality is that you really don’t know if you can reduce space unless you can compare to some similar buildings and see how they are doing with their space utilization.

When comparing space utilization it would be ideal to know how other similar facilities are managing their space. Maybe some are operating just fine on less, or maybe what is being requested of you will result in a space utilization that’s higher than anyone else’s. It would be nice to have a really low space utilization rate, e.g., less than 200 gross square feet per person, but you never really want to be the lowest when providing a critical service like space. It be really helpful to explain where you stand on space to management in a focused, rational way. Direct comparisons with a valid peer group would be invaluable and appropriate in making the correct decisions.

What is needed are benchmarks to show how your organization is managing space. You don’t have time to collect and input data for a benchmarking survey. What is really needed is a table or chart showing the space comparisons with a good peer group. Well, there are some tools available to answer these questions. Let’s look at some of the options that would support your position with management.

Let’s start with the Key Performance Indicators (KPIs) for space utilization. The usual KPIs for space utilization are:

• Gross Area Per Occupant
• Rentable Area Per Occupant

These KPIs shows how your space utilization compares with others. But comparing your space utilization with everyone else may give you the wrong perspective on your performance unless the comparisons are made with a relevant peer group.

In November’s benchmarking article, we looked at space utilization for large facilities (those greater than 600,000 sq. ft.) in a suburban setting; we later narrowed that down further to manufacturing facilities. This month, we will look at similar data, but for office space, and later on, for smaller facilities (125,000 — 250,000 sq. ft.).

Once again, we will use FM BENCHMARKING LITE to create a chart showing KPIs using a peer group based on your criteria. We will start with a chart showing the comparison for office facilities (see Figure 1). There are only a few facilities at the extremely low and high ends of the chart. This suggests our data is quite credible… most of the organizations that participated in the data understood the definitions and measured their space in a consistent manner.

This chart allows you to see at a glance how well your facility is performing via its space utilization. There are 346 buildings in this peer group with a median space utilization of 455 per GSF per person and a first quartile performance of 315 GSF per person. Let’s assume you have 750 employees in your facilities and they are utilizing space at the median level. But you think you could get them to first quartile performance by subleasing some of your facilities. That would result in a space reduction of about 105,000 GSF and if your operating costs are at the median level (about $6.00/GSF), the result will be a net annual savings of about $630,000. By looking at and comparing similar types of facilities, you will be able to make intelligent “data driven” decisions.

One other factor to consider might be the building size. Larger buildings are usually not as efficient as smaller buildings since the larger buildings have more penetrations for elevators, stairs, mechanical systems, etc. Our building is 160,000 GSF each, so let’s turn on a filter for facility size.

Figure 2 allows you to see at a glance how the facility size affects space utilization. There are 49 buildings in this peer group with a median space utilization of 385 per GSF per person and a first quartile performance of 306 GSF per person. Our performance of 455 GSF per person is in the 3rd quartile with this peer group… an even more compelling reason to improve our space utilization.

As a point of comparison, when looking at the results from the November benchmarking article, one sees that the median utilization rate for that entire sample (with different filters applied) is 514 GSF per person (versus 385 GSF per person with our current filters).

As you can see from these examples, such a benchmarking tool will illustrate where you stand in a very quick and easy manner, and in a way that you can show to your management. If your facility performance is in the third or fourth quartile you may need to investigate and benchmark further to determine the next steps to take. Some benchmarking tools (including FM BENCHMARKING) will enable you to benchmark best practices so you can see which best practices the better-performing similar buildings are doing that you are not doing in your building.