Utilization Jumps Ahead as Most Used Office Performance Metric

When it comes to corporate real estate portfolio management, there has been a big change in metrics. Instead of focusing on costs or how engaged or satisfied employees are, the favorite metric of CRE insiders has become utilization, according to a new report from CBRE Institute and CoreNet Global.

“Given corporations’ hybrid work strategies, utilization rate has become the most common metric for guiding CRE operations and performance—leapfrogging both occupancy costs and employee engagement/satisfaction,” the report said. “Additionally, seat and people density—which were not noted by respondents last year—is now considered a performance measure by more than one-fifth of respondents.”

The survey was of 186 CRE leaders during the latter half of 2022. Respondents oversee combined portfolios of nearly 1.6 billion square feet worldwide, with an average CRE organization of 173 full-time employees and an average portfolio size of 17.2 million square feet.

Utilization was mentioned by 47% of respondents as one of the top five metrics used by their organizations, up 7.7 percentage points from last year. Employee engagement or satisfaction came in the second spot with mentions from 41% of people. The third most popular answer, for 39% of responses, was business unit leader satisfaction. Occupancy costs per square foot was fourth at 38%.

Seat and people density were in the top five of 22% and 19% respectively.

Over the next year, 65% of respondents said they are considering a “consolidation strategy to support efficiency” and 64% plan to analyze the impact on real estate portfolio strategy of a larger remote workforce. However, only 28% are looking at more use of flexible office space. That result seems somewhat surprising given the amount of discussion of flex space in other studies and by people in the industry.

Some of the results are not entirely similar to a different study, the 2022-2023 CBRE Global Workplace & Occupancy Insights, an annual survey of major occupiers worldwide. In 2022, 21% of respondents pointed to utilization rates, whether average or peak, as the most important one, down from 28% in 2021. In 2021, 74% of respondents used utilization data. Last year, that was up to 89%. Also, 58% planned to increase their use of utilization in planning. In 2021, 74% of respondents used utilization data for occupancy planning; in 2022 it was 91%.

Also, 55% thought their total square footage of real estate would decrease within five years, while one-third expected to expand their footprint, and  7% thought there would be no change.