The current office sector continues to present challenges for commercial real estate leaders. While many companies maintain substantial CRE portfolios, fluctuating employee return-to-office (RTO) patterns and evolving workplace dynamics create uncertainty.
Amazon, Dell, and JPMorgan are pushing for five days in office in 2025, but employee resistance remains. Over 40% of organizations remain hybrid — more than double the 20% rate of 2023. But many companies are mandating office time, and the number of required in-person days per week has continually increased this year.
Some corporate leaders, however, have predicted that RTO mandates will gradually decrease in 2025. Redrob CEO Felix Kim said, “Companies are forcing people to come back to work in the office, but the tide has shifted. There is going to be a big battle in 2025, and I think remote work will emerge as the winner in that. Hybrid full-time is the way to go.”
Whether or not these predictions come true, commercial office space owners and investors are left with a sizable problem: optimizing their space. Here are some metrics that can help determine whether it’s time to downsize, repurpose, optimize, or potentially sell your office space.
Metrics to consider for office space
Comparative utilization rates
Post-pandemic, the office has evolved into a hub for collaboration and social interaction; however, individual work preferences vary significantly. By analyzing comparative utilization rates, building owners/operators can understand tenant or employee behavior, optimize space allocation, and create work environments appropriate for diverse individual needs and preferences.
These rates analyze space use across different buildings, cities, and regions. You can:
- Identify top-performing assets within your portfolio based on employee use patterns
- Determine frequency of use based on different space types (meeting rooms, open workspaces, quiet zones)
- Gain insights into employee preferences to make informed decisions about office space expansion or downsizing
Occupancy rate
This rate represents the percentage of a commercial space used at any given time, indicating how effectively the available space is used. The occupancy rate:
- Provides a direct measure of tenant presence and space use patterns
- Enables comparisons with industry benchmarks and competitor performance
- Identifies under- or overutilized spaces within a portfolio
- Facilitates the analysis of occupancy costs relative to actual usage
Practical applications for this rate are many! You can compare occupancy rates across different locations. Comparing competitor portfolios also provides insight into market trends and relative performance. For example, one study might show higher average occupancy in one part of New Jersey compared to other locations, suggesting potential variations in utilization patterns across different cities or regions.
Analyzing occupancy rates in conjunction with operational costs helps identify areas for potential cost savings. This analysis can reveal whether you’re using the most expensive assets within your portfolio effectively and guide decisions on potential space reductions or reallocation strategies.
Peak space utilization rate
This metric measures the occupancy of specific workspaces during periods of maximum demand, providing insights into capacity and efficiency. High peak utilization rates can lead to overcrowding, resource competition, and workflow disruptions, negatively impacting employee satisfaction and productivity. Conversely, low peak utilization rates may indicate underutilized space and inefficient resource allocation.
Analyzing peak utilization rates empowers you to:
- Adjust floor plans, introduce flexible work arrangements, and implement strategies to improve space use during peak hours
- Create a more comfortable and productive work environment by addressing overcrowding and ensuring availability of resources
- Reduce energy consumption, optimize facilities management services, and minimize operational costs
- Attract and retain employees by supporting return-to-office (RTO) initiatives
Return-to-office (RTO) velocity
RTO velocity is the overall direction and rate of change in space use over time — observed across weeks, months, and years — characterized as increasing, decreasing, or plateauing.
It provides a direct measure of employee RTO patterns and the effectiveness of workplace strategies. By analyzing this metric and its alignment with company policies, office layouts, and amenities, you can identify what is (and isn’t) working.
This metric can also inform critical decisions about portfolio optimization, including:
- Retention vs. disposal: Prioritize retaining assets with consistently increasing use, especially those with higher occupancy costs
- Space adjustments: Identify underutilized spaces and explore options for downsizing, subleasing, or repurposing
- Workplace improvements: Implement improvements based on observed utilization trends, like upgrading amenities in high-demand areas
Space utilization patterns
These patterns refer to consistent, predictable variations in short-term space utilization rates (think days or weeks), revealing how workspace use fluctuates over time. Understanding which spaces are over- or under-used (and when) helps optimize resource allocation.
For example, if the second-floor conference rooms are never (or rarely) used on Fridays, using the building’s smart HVAC system to adjust the thermostat can save on utilities.
Space utilization rate
While occupancy rate measures employee presence in a building or office, space utilization measures how employees use their workspaces. This granular analysis includes the usage of a specific area, such as individual floors and zones or individual conference rooms.
Imagine this scenario: Many employees work in the office three days per week. But, a space utilization analysis might reveal that they disproportionately congregate in the first-floor conference rooms while the second-floor meeting rooms are barely used.
This data might suggest a need to reallocate and optimize existing space. A corporate real estate leader might incorporate strategies such as reducing the overall footprint by downsizing or subleasing unneeded space or repurposing those empty spaces into collaborative areas or social zones.
Technology exists to help collect data. Occupancy sensors track real-time occupancy levels within specific areas. Wi-Fi signals can detect employee presence and movement within the workplace. Desk booking systems data offers insights into employee preferences and utilization patterns.
Advanced data analytics and insights can help you make informed decisions that enhance workplace effectiveness, optimize your real estate portfolio, and drive greater value for your organization.
Total occupancy cost
Total occupancy cost includes all expenses associated with owning, leasing, and operating corporate real estate:
- Rent/lease payments
- Property taxes
- Utilities
- Facilities management
- Insurance
- Costs associated with amenities, tenant improvements, or other operational expenses
It’s a critical factor in evaluating the financial performance of individual properties and the overall real estate portfolio. Understanding each property’s cost structure facilitates budget planning, cost optimization, and resource allocation decisions. Total occupancy cost analysis can also inform strategic choices associated with portfolio optimization, including:
- Identifying and addressing underutilized or high-cost properties
- Exploring opportunities to diversify your portfolio and mitigate risks associated with high-cost assets
- Leveraging cost data to negotiate more favorable lease terms and reduce operating expenses
Navigating the office space environment’s complexities requires embracing a data-driven portfolio management approach. Tracking and analyzing KPIs helps you gain insights into employee behavior, optimize space utilization, and make data-driven decisions that enhance your portfolio’s value and profitability.
Are you a commercial real estate investor — or looking for a specific property to meet your company’s needs? We invite you to talk to the professionals at CREA United, an organization of CRE professionals from 92 firms representing all disciplines within the CRE industry, from brokers to subcontractors, financial services to security systems, interior designers to architects, movers to IT, and more.