The Hidden Costs of Underutilized Office Space

March 21, 2017

Despite increased use of office hoteling and other alternative workplace management strategies, real estate is still a major expense for most businesses. Making the most of this investment in office space is critical.

Sometimes it’s obvious that a particular space is underutilized—for example, a conference room that’s seldom used because it’s out of the way, or because other available rooms are more comfortable or better equipped. In these cases, people might predictably use the company’s room scheduling software to reserve a prime space for all planned meetings—leaving more modest spaces vacant for most of the time.

The Full Financial Impact Is Larger Than You Think

Some costs associated with underutilized space are easy to identify: rent or property taxes, furniture, etc. However, there are also less obvious effects when space is underutilized. If you have more office space than you need, all of the associated overhead costs increase.

You could be paying higher insurance premiums, utility bills, and other expenses as a result of an oversized workspace. You might incur incremental costs associated with cleaning and maintaining underutilized rooms. It all adds up—so it’s important for companies to right-size their offices and ensure those spaces meet the needs of their workforce.

Prospective Customers or Employees May Be Put off by an “Empty” Office

When you bring a customer or a promising job candidate in for an interview at one of your offices, you want the space to have a positive energy. This is impossible if you have a dozen vacant cubicles gathering dust, or a large glass-walled conference room being used to store empty chairs.

Underutilized workspace is typically easy to spot, and too many empty seats can leave your prospects feeling uncertain about the health of the company. Likewise, current employees may perceive excess space as a sign that something is wrong.

Opportunity Cost: What Could Your Team Have Accomplished in the Optimal Space?

Sometimes it’s not a question of whether you have too much space, but whether you have the right type of space. Different teams and individuals will work most effectively in different spaces, according to the demands of the job and the personalities involved. As a result, an organization’s workspace needs will evolve over time, alongside its staff and business model.

It’s hard to quantify how much more productive, innovative, or motivated your people are when they have the ideal space for their work. However, as alternative, tech-enabled approaches to workforce management proliferate, it’s clear that having a great workplace will continue to be a key differentiator for organizations of all kinds.

Meeting this expectation remains a challenge because executive leaders still frequently don’t have access to objective about how people and space function together within the organization. Ideally, companies should be capturing objective data regarding occupancy and utilization of workspace—supporting ongoing optimization of real estate investments.