Why office spaces are more occupied but less utilized

Why Office Spaces Are More Occupied but Less Utilized: A Paradox in the Modern Workplace
September 18, 2023
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Global office spaces experience an increase in occupancy rates, yet they remain surprisingly underutilized. What's behind this conundrum?

The Occupancy-Utilization Gap

As companies increasingly encourage employees to return to the office, a peculiar trend is emerging: while more desks are being filled, the spaces themselves aren't being used to their full potential. According to recent data from CBRE, only 40% of employees have been using their office spaces for the first half of 2023.

You might be quick to attribute this to a hesitant return-to-work transition, but the reality is a bit more complex.

Beyond The Numbers: Seat Allocation and Space Efficiency

CBRE also reports an interesting shift in how space is being managed within offices. There is an increase in space sharing and seat allocation, and more efficient space planning techniques have enabled companies to slim down their global office portfolios significantly.

In fact, efficiency measures have escalated by about 20% since the onset of 2020, allowing some companies to reduce the size of their portfolio by up to 30%.

Despite these efforts, 64% of global office space is still underutilized.

Metrics Matter: Shifting Focus to Utilization

Corporate real estate leaders are not only worried about the empty spaces but are also reconsidering how they measure space effectiveness. While planning metrics were once the go-to indicators, performance metrics related to actual space utilization are now becoming the standard for making decisions on portfolio rationalization and optimization.

Sectors and Their Occupancy Journeys

Interestingly, different sectors have demonstrated variable patterns in their occupancy rates. Over the year, the global average occupancy rate surged by 101%. In the Americas alone, it increased by 29% above 2021 levels. Sectors like industrial and logistics witnessed an occupancy rate of 91% this year, up from 77% in 2022. On the other hand, life sciences saw an increase to 110% from 95%.

The Decline of Utilization Rates

Despite the uptick in occupancy, utilization rates have experienced a decline. In a year-over-year comparison between the second quarters of last year and this year, there was a drop across multiple sectors. Financial and professional services dipped by 44%, industrial and logistics by 42%, and life sciences by 35%. Even the technology, media, and telecom sector saw a decrease of 27%.

What Can Be Done?

The data suggests that companies must think beyond mere occupancy rates. Portfolio right-sizing and initiatives to improve the employee experience could play a vital role in attracting more people back to the office, thereby increasing space utilization.

While the situation may seem paradoxical, it offers an opportunity for introspection and innovation in how we think about office space management.

With a greater focus on utilization over occupancy, corporate leaders can strategize more effectively to meet the demands of the modern workplace—making it not just a space to work, but a space that works for everyone.