Where Are We At: Office Utilisation Rates

Way before covid, the move away from 1 desk per person was taking place. Like with many things, technology played a big part in this as the landline on the desk and the CPU under it changed. We no longer had to be tethered to the desk. It was the rise of the mobile office worker; the laptop class.

This changed office space utilisation rates from desk per person to persons per desk. 100% was no longer the norm. 75% became more common amongst major firms; 1 desk per ¾ of a person, or 75 workstations per 100 employees. This was based on the fact that it is rare (almost impossible) for 100% of employees to ever be in an office at the one time. For smaller firms it is slightly different. It is not so hard to have 20 people in a 20 person office all in the office at once – especially in December for the Xmas party. Realistically, the larger the firm, the lower the utilisation rate.

In 2020, technology adoption spiked and the mindset of CRE tenants changed.

Fast forward to 2023 and all companies are now adopting some degree of office space reduction based on no longer requiring 1 desk per person. Utilisation rates are going down. We now hear of 45-50% at 10 m² per person. For smaller firms it is more difficult, but they are doing it as well. Of course, every firm is different but overall, here and overseas, we are seeing and hearing an average 20% reduction in the use of office space over time. It is not an immediate thing. Some say this is bearish, whilst others are way more bearish. No matter the end result, the fact remains that most office workers can work from anywhere.

Currently, our favourite real, live, and recent example is a large corporate who has reduced its office space. Employees are delighted to be there, occupancy rates are high (because they have used the right utilisation rate that suits them), and there is room for some growth. The space reduction is approximately 40%.

This is not an isolated case and shows just how much things have changed and continue to change. The slow and steady decline in Sydney CBD’s office space absorption rates (real demand) over the last 20 years only substantiates the trend.

Occupancy rates may be rising but utilisation rates are falling and by default, vacancy is slowly rising and this shall continue indefinitely as leases continue to expire right across the office markets.