Understanding the performance of your company's spaces requires choosing the right commercial real estate metrics. While brokers, space planners, and the commercial real estate industry have many ways of looking at the performance of a building, many of those factors won't translate to your bottom line. Here are the metrics that really matter for your business.
Occupancy Cost
Landlords have many ways to charge you for being in your space. Ultimately, your rent, CAMs, recurring fees for services like parking or signage and every other line item don't really matter, though. What matters is your bottom-line all-in occupancy cost. After all, a space with $20 rent and $12 in reimbursements -- adding up to a $32 per square foot occupancy cost -- is cheaper than one with $19 rent and $14 in reimbursements and a $33 total bill.
Load Factor
Which space is bigger -- a 7,000 square foot office or a 7,100 square foot office? The answer is, of course, that it depends. In most multi-tenant properties, you will pay rent on your own space plus on your share of the shared spaces. The load factor, which is one of the more confusing commercial real estate metrics, explains what percentage of the space on which you pay rent -- called your rentable space -- is actually shared space like common restrooms and hallways. the higher the load factor, the smaller your space. A 7,000 rentable square foot space in a building with a 14% load factor contains 6,020 square feet of actual usable space. That 7,100 square foot space? It's in a building with wider halls and a 17% load factor, which means that it only contains 5,983 square feet of actual space.
Cost Per X
Another way of looking at your space is to calculate your occupancy cost on a per-unit basis. The unit you choose varies on the type of property you are analyzing. The most common commercial real estate metrics for measuring office efficiency are the cost per employee. To do that, you divide the total occupancy cost of the space by the number of employees in the space or the number of workstations. A space that costs you $250,000 per year and has 40 desks costs $6,250 per employee.
In warehouses, performance metrics require an additional dimension -- literally. Instead of looking at occupancy cost on a per space foot basis, you can analyze your space on the basis of the cost-per-cube, taking into account the height of the warehouse. To do this, take your total occupancy cost, and divide it by the volume of your warehouse (length times width times height).
Finally, retail tenants usually flip the equation and measure spaces on their revenue instead of their cost by looking at the rent to sales ratio. These commercial real estate metrics get calculated by dividing the space's occupancy cost by the total sales generated in that space. A small restaurant that costs $120,000 a year to rent and generates $1,500,000 in sales has a rent-to-sales ratio of 8 percent (120000/1500000).
Cars Per Day
If you have a space that is public facing, one of the most important commercial real estate metrics has nothing to do with the space and everything to do with the street in front of it. Traffic counts, usually expressed as a number of cars per day that pass by the property, tell you the size of the universe of people that could theoretically come into your business. More cars means more potential customers or visitors to your business.
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