Occupancy Rate: What Is It and How Is It Used?

Updated – January 26, 2024

Tracking and improving their occupancy rate is one of the simplest ways companies can create a more efficient office space, especially when they couple occupancy data with space management best practices. By tracking occupancy rates and related metrics, businesses can ensure they are getting the most out of all the available space in their real estate portfolio.

In fact, better occupancy forecasts can even help companies reduce the size of their portfolio, leading to cost savings and a smaller carbon footprint.

In the following article, we’ll explore what occupancy rate is and how and why to track it. We’ll also show you how to combine occupancy rate with space utilization data to create a more efficient office. 

What does occupancy mean?

In the context of the office, the term occupancy simply refers to the act of being in a particular space for a period of time. That can mean a desk, conference room, floor, or any other area of the office where people can go. Tracking the office occupancy over time allows organizations and facility managers (FMs) to make better data-driven decisions for their workplace strategy.

What does occupancy rate mean?

Sometimes referred to as ‘percent occupancy’ or ‘space occupancy rate,’ occupancy rate defines how much available space is actually being used in the office. 

Specifically, occupancy rate measures the amount of space you actually use in your office building or other corporate real estate compared to the amount of space you own/lease. It is typically measured in people per square footage or as a percentage. 

This measurement is important because it shows you how much space you’re actually using versus how much space is left sitting unoccupied. 

In other words, determining occupancy rate can provide a clear picture of how much wasted space is in your portfolio. This makes it critically important data for successful facility planning. It also makes it a core key performance indicator (KPI) for your real estate.   

Given that real estate costs are usually among a company’s biggest expenses—up to $14,800 per employee per year in New York—knowing where and how to cut back on space can dramatically improve cash flow. 

And given the amount of energy and resources that go into building management, cutting back on space also has the potential to dramatically improve a company’s carbon footprint.

“I’m a heavy user of occupancy and headcount reports. I run the Occupancy — By Location report twice a month to get a snapshot of how many seats, cubes, and rooms we have vacant to accommodate for new hires. I used to manually create these reports in Excel, but I could never pull them together as quickly or accurately as I can now with OfficeSpace.”

Scott Moitoza, Senior Director of Real-Estate and Facilities, Procore

What is a good occupancy rate?

There is no “ideal” occupancy rate that can be applied across industries, as needs may vary greatly between types of businesses. 

If you’re a real estate investor, you might care about the vacancy rate of a potential investment. If you’re in charge of hospital occupancy, you might be focusing more on bed availability and revenue management. If you’re a hotel owner, you’re likely more concerned with your average daily rate (ADR) and how it is affecting hotel performance. 

However, if you’re managing people, whether in a large distributed workforce or a small team in a small office, it’s crucial to take a holistic approach toward how you’re using your space. 

While there is no specific ratio that works for every team, a good occupancy rate is ultimately one that keeps your workers happy, safe, and engaged while keeping real estate costs as low as possible.

How to calculate occupancy rates and space utilization rates

There are two ways to calculate occupancy, and both formulas are fairly straightforward: 

• Occupancy ratio = Occupied seats/(Total number of seats)

This will give you the actual number of occupied seats in your office versus the total number of seats available. You can also calculate this ratio as a percentage:

• Occupancy rate = (Occupied seats)/(Total number of seats) x 100%

Calculating your space utilization gets a little more challenging, which is where good space management software really comes in.  

First, you need to identify what utilization rates matter for your end goals. Should you track desk usage? Conference room usage? Where office neighborhoods tend to congregate? Do you need to determine how well your office supports your new hybrid workforce?

Once you’ve determined which metrics are relevant to your goals, you can ensure you’re getting the right reports and analytics from your space management software. This provides a bespoke window into your workplace.  

From your new vantage point, you might see that there are underutilized areas of the office. So perhaps you need to rethink your agile working strategy.

Or maybe, thanks to your new activity-based working strategy, you see there are not enough private cubicles to go around (based on data that shows where employees are choosing to check in each day). 

Ultimately, by using the tools we’ll cover further below, you can collect the data you need to improve how you’re using the three basic elements of space management ( space planning, implementing the right tools, and space tracking).

This data can help you understand whether you need to adjust your hybrid work schedule. It can also let you know if you need to offer more—or fewer—flexible seating options.  

New space considerations

Before the pandemic, when organizations looked at their occupancy rate, they were mostly thinking about how to maximize their space utilization. Today, of course, the need for social distancing adds a new level of complexity to this process. 

Namely, the required space per employee has changed dramatically.

Pre-pandemic, companies could simply let the type of work an employee was doing dictate how much square footage they needed. A creative employee in a coworking environment might need 150 square feet, while a phone-based sales rep might need a lot less space. Now, there are more health and safety concerns to take into consideration. 

This means the office space must account for both how much space employees need to do their actual jobs and how much space they need between each other to maintain social distancing. And even if there are no official mandates about social distancing, we can likely expect individual employees to remain cautious about their space for the foreseeable future. 

Distancing Planner

“We are all going to bring a certain level of anxiety with us for a little while around personal space,” says Earlywine. “So densifying a conference room or cramming people into a training room is probably not going to be the social norm for a while. Remember, we all spent two years social distancing, that doesn’t change overnight.”

“Distancing Planner made our office re-opening strategy so much easier. The tool instantly generates socially distanced floor plans, which really helped us for sites where we have unusual seating arrangements. We’re going to be using Distancing Planner to make the best use of our reduced capacity.”

Randy Peterson, Senior Direcor of Real Estate and Facilities, AllianceRxWP

For this reason, companies can benefit from a tool like Distancing Planner, which can essentially do this work for them. It instantly generates seating plans that allow for as much space and distancing as required. 

Combining occupancy rate with other data

Your occupancy rate can give you an idea of whether you have too much—or not enough—office space. But you need more data to give you the clearest picture possible of how workers are interacting with your space so that you can make better real estate and strategy decisions. 

You might have high occupancy rates, for example, while still having several underutilized areas in the office. Or you might have a building that is about to run out of space, despite having conference rooms or quiet zones that employees barely use (low occupancy rates). 

In short, simply collecting data on your average occupancy rate alone isn’t enough. You must also gain insight into how your space is serving employees or whether it’s fostering good collaboration in the workplace. This is especially critical as companies experiment with different hybrid work models and new work environment types to create a better return to the office.

Space utilization and headcount planning

Occupancy rate is just one benchmark of office space utilization. Space utilization encompasses all the analytics of how people are actually using the space they’re occupying. It’s when you know your occupancy rate and combine it with full space utilization data that you can start to provide comprehensive and effective facility management. 

This may involve being able to more effectively accomplish headcount planning, which is especially important for today’s distributed workforce. Or it could mean noticing one of your phone rooms has an unexpectedly small utilization rate and might be better as an open working space.  

Space utilization is about what workplace strategist Angie Earlywine, Senior Director in the Total Workplace division of Global Occupier Services at Cushman & Wakefield, refers to as making office spaces that are ‘fit for purpose,’ which she says is a central piece for creating a better hybrid workplace experience. 

“Figuring out that recipe of what to give to each team and how that’s appropriated in the workplace is complex,” she says. “One of the most important things we have to do as workplace strategists is figure out what is fit for purpose, down to the team and down to the individual and how does it align to the short and long term goals of the business,” Angie says.

Of course, this is complex work—so much so that many workplace strategists refer to optimizing occupancy and space utilization as more art than science. That’s why it’s recommended that you use cutting-edge space management software that can collect and analyze complex data sets for you. 

“If it’s not fit for purpose, down to the team level and down to the individual, you could be misappropriating funds, resources, space, and technology.”

Angie Earlywine

Benefits of Space Occupancy Data

Having in-depth space occupancy data is as critical for enterprise facility management as it is for small companies. 

This process is about making the workspace fit for purpose. Granted, if you’re not using your space wisely, you’re not being cost-effective. But, more importantly, it’s about supporting workers and fostering a better work environment. 

Having this data can help FMs and workplace leaders make data-driven decisions that benefit everyone. You can only be sure of the right solution when you have a good handle on the problem. If people are fighting over desks, you probably need to offer more desks. Or rework your agile working strategy. Or simply invest in better desk booking technology. 

Space occupancy examples

Specifically, there are many ways to use space occupancy data to create a better office space.  For example, it can help companies:

• Manage limited occupancy, including determining how many people can safely use a shared space—critical given our new health realities.
• Determine if your company has too many individual workspaces, especially helpful in a free address workplace.
• See if the company is underserving departments with regard to office space.
• Get a better picture of which conference rooms employees are using and when, which in turn can help inform plans to host more—or less—hybrid meetings.

Simply put, space occupancy data gives you a birds-eye view of your workplace. This provides the insight to see where there are discrepancies between resources and needs. Being able to identify issues before they become actual problems is one of the best ways to future-proof your office. 

“It’s incredibly important for me to be able to check the density of each of our offices in real-time—what’s occupied, what isn’t—because I’m not able to be in every location. So when I have a question like “What’s the situation in Tokyo?,” I can go to OfficeSpace and get the answer in seconds.”

Bernard Morrissey, Chief Officer for Real Estate and Facilities, K&L Gates

For these reasons, collecting space occupancy data should be at the top of every forward-looking facility checklist. 

How to Collect and Use Occupancy Rate Data

Clearly, workplace analytics are the backbone of any successful facility. It’s best to collect these types of analytics with an Integrated Workplace Management System (IWMS).  

When FMs have access to good space utilization and occupancy rate reports from their IWMS, they are in a better position to make the well-informed decisions we’ve covered. 

IoT sensors can also be especially helpful for collecting occupancy data, especially in a free address workplace. 

When this data is combined into actionable reports, FMs can use them to:

• Gain insights into critical workplace metrics like cost per employee, occupancy, and operational costs.
• Combine real estate costs with their occupancy rate to better understand their budget and where to build in benchmarks.
• Understand department behaviors and whether individual departments have the right types of spaces to meet their needs.
• Determine if they’re meeting the seating needs of their employees, whether they’re in the office every day or part of the hybrid workforce.
• See which space types are most popular with employees, and make decisions to modify the office as necessary.
• Continually configure office neighborhoods to better serve team members.
• Better understand their space requirements, so they can adapt as needed—and never have to worry about suddenly running out of space.
• Provide more intelligent move management.

Occupancy data and the hybrid workplace

Given these many applications, using occupancy data is at the forefront of managing the new hybrid workplace. The reality is that it takes time to develop a workplace strategy and get flexible working right. Some amount of trial-and-error is to be expected. But with the right space utilization software, FMs no longer have to rely solely on their gut instincts to make decisions for the office.

“Knowing who’s using our offices, having good data on occupancy, good data, and utilization, that’s going to be critical as we fine tune the portfolio on the other side of this. And I can’t imagine how you would do that without a tool like OfficeSpace.”

Patrick Hoffman, SVP of Corporate Real Estate and Services at Syneos Health

Simply put, FMs can save money, effort, and time when they have data. It’s what helps them understand what needs to be changed and the best way to enact that change. And the best way to collect and analyze the data they need is with capable and dynamic software like OfficeSpace.

Let OfficeSpace help you collect, analyze, and improve your occupancy rate and other space utilization metrics so you can make the most of your office space. Reach out for a free demo. 

OfficeSpace can help you collect and use your occupancy rate to improve your office space. Reach out for a free demo. 

Photos: SolisImages, eclipse_images, Towfiqu barbhuiya, Headway, Hispanolistic