Calculating your company's commercial real estate utilization isn't an ungainly and ultra-complicated process. The mathematics underlying it is simple and, with the help of online calculation tools, you don't even have to do it. Instead, it just requires collecting a few numbers for each site.
Commercial real estate utilization is a metric that looks at the size of your space and at what you are doing with it. It can be calculated for any type of property and provides a quick check to see if a space is too small, too large or perfectly sized. Used strategically, your CRE utilization can also allow you to benchmark against the market.
Calculating Office Utilization
To calculate your office utilization, you need two variables and a constant:
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The size of your location (or locations) in square feet
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The headcount of your location (or locations)
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Your company's ideal number of square feet per employee (a constant)
Dividing the number of employees into the size of your locations gives you your actual square feet per employee. Further dividing your ideal number into your actual gives you your utilization rate relative to your target.
For instance, consider a company whose goal is to have 150 square feet per worker, 80 workers, and 16,000 square feet of space. Dividing 80 workers
into 16,000 square feet gives an actual square footage per employee of 200.
Next, dividing 200 actual square feet into 150 actual square feet gives a utilization rate of 75 percent.
Use our FREE Office Utilization Calculator
Calculating Warehouse Commercial Real Estate Utilization
The equation to build a utilization metric for warehouse space requires three variables and a constant:
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Your warehouse's square footage
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Your warehouse's average rack height
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Your total used space in cubic feet
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Your estimated loss factor relative to your warehouse's cube size, expressed as a percentage (a constant)
First, you would calculate the size of your effective cube, or your maximum storage space, by multiplying your warehouse's square footage by your rack height by your loss factor. Next, you would divide your used space estimate into the maximum space to find your utilization.
For instance, a 100,000 square foot warehouse with 24 foot racks and a 50% loss factor would have a maximum capacity of 1.2 million cubic feet (100,000 X 24 X 0.5). If you actually store 950,000 cubic feet of space, your utilization would be 79 percent (950,000 divided by 1.2 million).
Use our FREE Warehouse Utilization Calculator
Strategically Benchmarking Commercial Real Estate Utilization
The constants in the two equations are the key to benchmarking your commercial real estate utilization. Both allow you to either look inside or to look at the broader industry to determine how your portfolio should work. For instance, you might calculate that your company, in total, has 300 employees spread over 50,000 square feet of office space. This makes your company's average space per employee just under 167 square feet. Plugging that number into the equation lets you see how each location's commercial real estate utilization compares to the rest of your company. Pulling a number from the broader CRE world, though, lets you benchmark your company against your competition.
Calculating commercial real estate utilization is an important first step in strategically managing your corporate real estate portfolio.
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