In last month’s newsletter, we asked in a poll what you think the ideal staff to tenant ratio is and the responses were scattered:
- 19% of respondents said <1:35
- 25% of respondents said between 1:36-1:90
- 16% of respondents said >1:91
- 20% of respondents said “I don’t know but I want to”
- And 20% of respondents said “I don’t know and I don’t care”
While the former half of these answers point to a level of intuitive understanding when it comes to staffing office buildings, the latter half certainly illustrates the lack of understanding and care to this important metric.
The challenges the real estate industry is facing is affecting nearly every aspect of operations, including both overstaffing and staffing shortages. The staff to tenant ratio in any given office building is not a metric that is currently measured, but it is one we suggest should be tracked. As vacancies are at an all-time high and lease square footage is at an all-time low, introducing this concept into operations has the potential to create an entirely new way of approaching operating efficiencies. Since there is no true standard, there is no “right” or “wrong” but rather a directional metric that should be analyzed in comparison to similar properties and trends over time. Additionally, staffing ratios will likely change over time as building staff adapt via increased knowledge, skills and technology deployed for process automation. For this reason, buildings ideally need to reevaluate their goals, performance data and staffing ratios periodically to determine if the staff count requires adjustment.
In Q1 2023, class A office buildings across 4 major cities experienced average blended weekday occupancy rates around 28%, with office occupancy reaching as high as 76% in one major market. Meanwhile, building staffing levels remain at full occupancy levels. Given the occupancy rates, staff to tenant ratios currently are around 1 operating staff for 18 tenants returning to office (1:18) versus what it would be for a fully occupied building, which is closer to 1:66. What’s more, before remote and hybrid work rose in popularity, the average people density in offices was 1 person to every ~300 square feet. In Q1 alone, that number was closer to 1 person to every 1,800 square feet. Building staffing was not adjusted to reflect this drastic change.
It should be concerning that an industry affecting nearly all aspects of our economy has not tracked staffing ratios, and more so based on the actual physical occupancy of an office building for comparison, here is a list of other industry standard ratios:
- HR to Employee Ratio (3.4:100) for companies under 250 employees1
- Student to Teacher Ratio (15:1) for U.S. Public Schools K-122
- Nurse to Patient Ratio (1:4-5) standard on medical-surgical units3
- Server to Table Ratio (1:5) for casual dining4
- Staff to Rooms Ratio (20:10) for five-star hotels5
The current state of data analysis in the real estate industry for operational management is rudimentary at best. . With what we know about the return-to-work trends and new flex spaces driving office demand, why aren’t we transitioning to running buildings similar to an event venue? Where demand drives staffing schedules and amenities can be configurable based on occupancy and tenant usage trends?
Understanding the ratio of building staff to tenants can enable this agility because it provides a new perspective on staffing, operational efficiency, and the use of technology in office buildings. It serves as a useful barometer to operating efficiencies: the higher the ratio, the more operationally efficient your teams must become in order to the ensure consistent quality of service to your tenants.
In the same way that digital tools, like QR codes for online food ordering and payment, have impacted the restaurant industry, so too can commercial real estate see similar benefits. Digitizing the ordering process for restaurant guests has freed up significant time for workers – which allows them to focus their attention on higher priorities while simultaneously extending their capacity to seat more tables. Consider smart building technology as a tool than can enhance efficiency and productivity for your teams. Digital tools in the hands of your tenants can free up time so teams can focus on issues requiring their specific skill sets, all while servicing more people in the building than was previously possible.
To summarize why we believe the staff: tenant ratio should be widely considered, we leave you with this thought exercise:
Why doesn’t this CRE industry have standardized metrics against which to measure itself? Why are some of us still using paper and a calculator to analyze monthly overhead and labor costs?
Now that we have you thinking, try to answer these two questions: How can I create operational efficiencies, and how can those efficiencies be quantified and measured?