How to Build a Supply and Demand Model for Forecasting Office Space
Fernanda Belo leads Workplace Strategy and Insights at VergeSense, helping clients maximize the value of their spaces.
For years, workplace strategists and space planners were tied to one key data point: headcount. How many employees do you have, and where will they be assigned to work? Today, the big question is— how much space do you need to accommodate your company's growth in a sustainable way?As companies all over the world have embraced some form of hybrid work and flexibility, workplace leaders have had to adjust their strategy to meet these changing demands and match their supply of spaces.
Many professionals choose to come to the office to connect with teammates and collaborate on major projects in person. Others use the office for deep work, or individual training sessions.
We’re unlikely to go back to a pre-pandemic world of full-time onsite work. Occupancy has become inconsistent and unpredictable and as a result, optimizing for real estate cost and employee experience has never been harder. Because of this, the most innovative companies are investing in occupancy intelligence to be informed, create cost-effective spaces, and build experiences that are worthy of the commute.
So, what is occupancy intelligence?
Occupancy Intelligence is how workplace, real estate, and facilities teams gain a true understanding of how and when their portfolio and spaces are actually used so they don’t have to compromise between reducing cost and improving employee experience in a world where occupancy is increasingly dynamic.
What used to be the north star of workplace real estate planning has now taken the backseat. Overall headcount is still important but no longer your number #1 metric. This is replaced by the need for a true understanding of your workplace utilization.
So how can workplace experience teams and real estate planners adjust their strategies, design and operate for their own future growth? And how can they gain insight into true understanding? Let’s explore.
What is true understanding?
True understanding refers to how many people are in a physical work space at any given moment. It is inclusive of active occupancy, people count and passive occupancy.
- Active Occupancy: the state of a space when it is occupied by a human
- People Count: the number of humans in a space
- Passive Occupancy: the state of a space when there are indications of use, such as the presence of human belongings, but without a human present.
You can leverage true understanding to make broad observations such as—on average, how many people come into each office in your real estate portfolio? — or you can dive deeper into your workplace data and determine how many people are using each area of a particular office.
Supply and Demand in Corporate Real Estate
Traditional Workplace Supply & Demand Planning
Before the pandemic, real estate planning was based on a supply and demand model where the supply in question was the physical space assigned for employees, and the demand was centered around headcount.
If a company had 1,000 employees, most likely all of them would be assigned to certain locations under an employee / seat ratio. The utilization of these locations would be based on few sources of high level data combined with assumptions based on an expected daily attendance from individuals. The company would then plan for having space (and equipment) for a high percentage of the 1,000 people.
Each year, that exercise would repeat and projected headcount growth would be brought to the equation for results discussion and evaluation. With that said, when it came time to project headcount for the following year, workplace real estate planners would determine if their current space could still work for the company or if it was time to expand or retract. For example, if they planned to grow by 15% by next year and the utilization assumption was at the limit, that meant there would need to be more capacity available.
Data driven Supply & Demand Space Planning
Say, for that same company with 1,000 employees, only 40% come into the office today.
So the new magic number to accommodate is 400. That typically means that the existing space certainly won’t need to expand for a while, even with aggressive headcount expansion goals.
Real estate planners can now work with the company’s existing real estate portfolio and envision redesigned spaces that can work for years to come, instead of having to expand the space every time headcount is set to grow.
As more people occupy a space, the cost per occupant goes down. This means that when the company grows to over 2,000 employees, the space likely won’t need to be expanded at the same rate as headcount, as hybrid and flexible working models exist.
Creating a plan forward based on meeting the demand of a hybrid workforce is an exciting prospect — and workplace strategists everywhere are rising to the occasion.
How Corporate Real Estate Investments Are Changing
With the advent of hybrid and flexible work, square footage is going farther than ever.
If the company with 1,000 employees now only has 40% coming into the office, many areas of the building are lying completely empty. If the space isn’t adjusted to meet today’s reality, employee satisfaction in your space can go down, because working at a desk in a sea of empty desks isn’t more engaging than working from home.
But with a true understanding of workplace utilization, workplace teams can confidently decide on a path forward. Moreover, with workplace experiments, you can minimize risk of failure by rolling out your space planning strategy to a part of your portfolio, before a full-scale roll-out.
There are three common paths being pursued by companies today, both bolstered by accurate occupancy data and an openness to making changes.
1. Maintain your current portfolio and redesign
Companies can keep all of their existing portfolio, redesign it, and see the costs as an investment in the company’s future. It’ll take much longer to fill the space to full capacity again, so the company may balloon to 2500 employees before they need to move to a larger space. And in order to meet the needs of current employees who come into the office, they can start thinking about a redesign that emphasizes collaborative spaces, fewer individual desks, and more amenities.
2. Right-size your portfolio and redesign
The other path involves right-sizing. If a company is looking to curtail real estate spending now and plan to continue hiring remote and hybrid employees, they can decide to rightsize the space. Right-sizing involves selling or subleasing whole floors (or even buildings) that are sitting empty, and redesigning the space that’s left to meet the needs of their onsite employees.
3. Repurpose low utilized areas
Right-sizing is not always an option. Long term and inflexible leases make it difficult for actions to be taken. At the same time, businesses are transforming and the hybrid model is quite new to some organizations. In this journey, they will learn better the reasons why people come to the physical spaces. With this learning, there may be an opportunity to re-invent / repurpose some of the low utilized spaces into new demands. An example, the company can repurpose some of the “in house” spaces to host events with clients, training and camps as opposed to using external facilities.
No matter which path is chosen, change is a constant and office redesigns help workplace teams make the most of what they’ve got.
How the New Workplace Supply and Demand Framework Applies to Workplace Design
There’s another way to think about supply and demand when it comes to workplace real estate and design: drilling down further into not only how many people come to the office, but where they spend their time when they do. In this framework, supply refers to various types of workplace spaces, and the demand refers to the active use of these specific spaces.
By collecting and analyzing workplace occupancy data, workplace strategists can determine what kinds of spaces need to be expanded and added, and which ones can be reduced to make room for them.
Before the pandemic, 1,000 employees might have needed 1,000 individual desks, 10 bathrooms with 3-5 stalls each, 2-3 large eating areas, 4 printing stations, 5 open collaborative areas, and 120 meeting rooms (of various sizes).
However, now that only 40% of the employees ever set foot in the office, the layout and design of the office needs to change — but it’s not enough to just scale down the number of each type of space to match the number of onsite employees there are. The company needs to dig into their employee surveys and find out why they’re coming into the office, and corroborate that information with occupancy data that shows how spaces are being used.
If employees are largely coming in to connect with their colleagues, collaborate on major projects, run brainstorms and large meetings, it makes sense to emphasize collaborative spaces in your next redesign.
For the 400 employees coming in, the office could now need 300 to 400 desks (depending on how many people come in daily vs. weekly), 5 bathrooms with 3-5 stalls each, 2 large eating areas, 3 printing stations, 5 open collaborative areas, and 75 meeting rooms (of various sizes).
See how employee-to-seat ratios are changing in today’s workplace. →
Every company will have different needs and different factors, so their space calculator will be totally unique. But charting the path forward with true occupancy data in hand can help workplace teams build a supply and demand framework that works for their company.
Take control of your portfolio and spaces
Quality real estate comes with a premium, and employee happiness is too important to leave workplace planning to guesses and estimates. It’s not enough to plan office expansion based on headcount and where employees are located. Taking a data-informed approach to workplace planning will help you get the best of your current space, meeting the needs of your workforce, and help you adapt for years to come.
To take control of your portfolio and spaces by introducing workplace experiments, and explore the free guide to running workplace experiments in a low occupancy world.