By Denice Michel
Jones Lang LaSalle
Our JLL team recently conducted comprehensive studies of space characteristics for nine major companies encompassing some 42 million square feet of corporate office space in 583 buildings around the globe.
The firms surveyed came from a wide array of industries including technology, financial services, professional services and consumer products
One of our most surprising discoveries was that the average portfolio vacancy rate was 26 percent. Prior to the study, most companies estimated their average vacancy at only 7 to 10 percent. Accurately measuring vacancy offers some of the greatest potential for cost savings. For one of the companies, correcting a nearly 30 percent vacancy disparity delivered a $48 million return.
Here are some of our other key findings:
The density in CBD buildings averaged 267 SF per person. Suburban workers fill roughly 50 percent more space at 419 SF per person. In the late 90s most companies set a goal of 250 SF per person, which was amended to 225 SF after the 2001-2002 recession. Nevertheless, most companies are still not achieving this target.
In both Europe and Asia Pacific, both city and suburban office space are generally more expensive due to population density. Even nations with a larger land mass (eg., Russia) are challenged by a lack of available office space vs. demand.
- Europe: While Europeans are accustomed to working and living in smaller spaces than Americans, the implementation of alternative workplace strategies have developed less quickly than in the U.S. This has changed over the past few years, though, as corporations are now looking to reduce their European footprints.
- Asia Pacific: The dearth of office space is magnified in the Eastern world, where mega business centers such as Singapore, Hong Kong, Japan, Korea and Taiwan operate in constricted boundaries. In China and India, where land is more plentiful, office development and construction are racing to keep pace with exploding economic development. In the densest areas, this results in an emerging standard seat size of just 20 SF per person!
To summarize, geography, building function and space classification must all be carefully considered when optimizing space utilization. While complex and multidimensional, an accurate portfolio measurement and reporting process empowers real estate executives to identify vacancy and make fact-based decisions.
In virtually every case, effective portfolio measurement programs deliver significant cost savings.