In this article, we describe metrics that summarise the operational performance of a coworking and flexible workspace. We emphasize metrics that can be compared across spaces to allow an objective assessment.
Coworking and flexible workspaces are real estate and therefore share some metrics with traditional offices. They also allow tenants to share some spaces, which makes the traditional metrics inappropriate in some cases. Let's dive deeper into these issues and suggest solutions.
If there was only one metric to consider, that should be the revenue per square footage (or meter where relevant). This summarises the revenue generated by using the space in one number. This is also helpful for landlords and lenders because they can compare that to other real estate asset classes.
To understand its level and variations, one can refine it in two figures:
Usable Square Footage is the amount of office space allocated to one tenant. This could be a desk, a chair and some storing equipments.
The rentable square footage includes the common areas. An astute way to calculate the rentable square footage is to allocate a fixed proportion of the common spaces to each tenant so the sum of rentable square footage will be equal to the total square footage of the space. This is actually a good way to measure occupancy, which we now turn to.
It is not straightforward to measure occupancy in a coworking or flexible workspace because the number of desks is not a fixed number, unlike hotel beds. Besides, common areas are not always "occupied" but do impose some constraints on how many people can fit in the space. What are we trying to measure with occupancy? We are trying to get a sense for 1. how much more revenue could be made with more customers 2. until the space will start to feel too full to add any more.
Here are some measures that fit these two objectives:
The rentable square footage is a good measure to estimate how much more customers can use the space because it takes into account both the office space available and the common areas. This is particularly adapted for private offices. The occupancy is thus :
Rentable square footage sold / Total square footage of the space
Note that you will want to allocate every shared square footage in the rentable square footage and include them all in the "total square footage" (even toilets!). In this way 100% occupancy will really mean that not a single additional customer can fit in.
It can make sense to include meeting rooms as well, although a dedicated measure of the utilisation of meeting rooms can be helpful to identify times where you can offer them for external booking.
Now for the most flexible parts of the office, such as the hot desks, we have a problem: coworking spaces typically "overbook" the hot desks on the assumption that not everyone comes at the same time, like gyms. Using the square footage occupancy, you will get to a number over 100%, for instance 2x or 3x, which is not helpful to know if you could book the space more. We propose an alternative solution for hot desks.
Just like in gyms, it makes sense to "overbook" hot desks because not every members come at the same time. Knowing what the right number of overbooking is should be left to experimentation. It depends on the type of clients one has. In our experience the number tends to be between 2x and 4x. (You can request access to our database to know what the number is more precisely in your area). Once you know the number, you can estimate the "occupancy" of hot desks as:
Actual hot desks utilisation rate / Target hot desks utilisation rate
With this method, you get a number between 0 and 100% that be compared to the private offices occupancy as defined previously. This method can apply to fixed dedicated desks as well by assuming the target utilisation rate is 1.
Now if you want to boost your revenue per square meter at full or near-full occupancy, what is the right metrics to look at? Well, an increase can only come from price in this case (assuming no expansion). It is helpful to break down the price in two parts: the price per desk and the price of ancillary services.
The revenue per desk is the actual price of a desk sold after any discount for contract length or promotional offers. This is simply the total revenue divided by the number of desks. For hot desks, this is the average membership cost.
Coworking and flexible workspaces do not offer only desks. They offer common areas, which are sometimes sale points for "ancillary services" such as events, coffee, virtual offices and even flower delivery (real example). Ancillary revenues can be broken down in the ones constrained by the square footage (events, podcast equipments, lockers, coffees, etc.) and those that are not necessarily constrained by the square footage (virtual offices).
To allow comparison with other spaces, we then suggest to measure the ancillary revenues that are "space-dependent" on a per square footage basis and the others ones on a per customer basis.