Remote work is a new reality for many businesses. Perhaps you feel it was forced upon you and is a challenge to manage and monitor. Like any change, remote work models are unsettling. But as a change, it can also be a disruption in a good way.
Having workers show up at an office every day is a considerable expense for a business. For some businesses it is an unavoidable expense; but for others it is a real opportunity to improve profitability.
Let’s start with office costs. What is your office space costing per employee?
Toronto Bay Street offices lease at about $69/sq.ft.; office space on Second Street in Calgary is about $55/sq.ft.; and rent on Burrard Street in Vancouver costs about $58. Of course rent in the suburbs and outside the core is lower; commercial space in the Greater Toronto Area can range from $8.00 to $27.00 per sq. ft.(see note 1). But those are just for empty offices–you still need furnishings, walls, cubicles, computers and phones.
How much space each employee needs is typically measured in “personal Useable Square Footage” or USF. USF measures the actual usable footage (not including off limit areas like utility closets, and shared space with other tenants like lobbies, washrooms, hallways, loading docks, and staircases). As a tenant, you pay for a portion of this shared space in your lease and is counted in your “rentable square footage”. This “shared area factor” is typically 10-15% of your lease cost.
The amount of USF per employee is related to your business sector. Crowding people too tightly can hurt productivity and create office friction.The less mobile the workforce, the lower the USF. Call centre employees who usually sit at a cubicle for their entire shift have low space requirements. Meetings, as well as working and collaboration spaces increases the USF. A typical USF allocation for different businesses is as follows (see note 2):
- Call Centres: 50-175 USF
- Technology: 115 to 155 USF
- Finance: 110 to 245 USF
- Engineering: 150 to 185 USF
- Law enforcement: 100 to 240 USF
- Social services: 175 to 235 USF
- Biotech and science: 125 to 410 USF
- Legal: 245 to 525 USF
An Example Calculation
Multiply these numbers together and you get an example of how much you’re paying for workspace per employee. For example, taking the median value for finance workers, office space in downtown Calgary might cost:
178 USF x $55/sq.ft. = $9,790 plus 10% for “shared area factor” = $10,769 per employee per year
And of course, there’s the cost of furnishings and equipment, electricity for lights and computers, and other expenses for common amenities like coffee and tea, and custodial services that are part of providing a physical office for employees.
Converting at least some office area to “hotel space” so people can portion work at home and in the office can provide a big bump to a business’ bottom line.
It might be contrary to our expectations, but remote workforces are actually more productive than requiring all employees to work out of an office. AT&T reported that moving their sales teams to a “work from home” model increased sales by 20-40%. Moving managers to a telecommuting model increased their productivity by 8%-29%. Gartner Group, a renowned technology research and consulting think-tank, puts productivity increases for telecommuting workers at 10%-40%.
Productivity per employee is a harder metric for most businesses to measure but the evidence is clear.
- Leasing costs across Canada: https://www.intelligentoffice.ca/blog/the-cost-of-opening-an-office-in-canada
- USF allocations: https://spaceiq.com/blog/average-office-space-per-employee/
- Crandall, W. & Gao, L. (2005) “An Update on Telecommuting: Review and Prospects for Emerging Issues.” SAM Advanced Management Journal,70(3), 30-37.
- Dutcher, E. & Saral, K. (2012) “Does Team Telecommuting Affect Productivity? An Experiment.” Working Papers in Economics and Statistics. 2012(22).