There’s been an interesting paradigm shift in the relationship between organizations and their offices.
In the course of a few short years, what was once viewed as a corporate necessity has now been stamped with a massive question mark.
With remote work becoming increasingly common and viable, many organizations are reevaluating the role of the workplace in their business strategies, assessing its value proposition, and wondering how much—if any—they really need.
In the minds of many, this all boils down to determining the ROI of the office.
But how can you actually quantify that?
In this article, we help answer that question.
The traditional office space valuation for organizations
Typically, organizations look at their bottom line when determining the value of their office space.
That is to say—how much does your office cost you on a monthly basis and how much of your revenue does that number account for?
But this is a completely backward way of looking at it.
Instead of calculating your office space expense as a percentage of revenue, companies should be evaluating the return on that investment. That is to say, how much more revenue is achieved as a result of an investment in the workspace?
There are two factors to this equation.
Reverse-engineering your office space goals: The top-line opportunities of a high-quality workspace
Rather than calculating how much your office space will cost you each month, start by getting introspective and considering why you want an office space in the first place.
We can bring this to life with a simple hypothetical scenario.
Let’s say that your goal with having an office is to create a happier, more collaborative, and more engaged team.
Ultimately, you may believe you have a better chance of achieving this goal if your team is in the office even three days per week.
This is the first factor in the office ROI equation.
What might be the revenue benefit of having a more productive and more engaged team?
For the sake of simplicity, imagine it meant you could get 10% more productive output from your employees.
If your business is generating $10 million per year in revenue, that 10% would represent an extra $1 million in annual top-line revenue.
And if your office costs $300,000 per year, it should no longer be viewed as a hit on your bottom line. On the contrary, it’s actually enhancing profitably by $700,000 annually. That is a 233% annual return on invested capital. This seems simple enough.
But here’s where that paradigm shift comes into play.
Understanding the human element: What it takes to create a highly productive workspace
Today, we’re seeing companies realize that it’s more challenging to get people into the office than it was before the pandemic.
In order to address this challenge—and to reap those potential ROI benefits—you need to deploy a workspace that’s somewhere that your employees want to be, not somewhere they’re forced to be.
If your team doesn’t want to be at your office, then the risk of not achieving your top-line revenue projections is significantly increased.
So, the big question becomes this: what does that office even look like—the one that will create the desired results—and how do you go about bringing it to life?
Opportunities and costs: DIY vs. outsourced workspace
You know the goals you want to achieve from your office. You know it needs to be a place where your employees want to be and are highly engaged.
But what does that really mean? What qualities does the right workspace have? How is it designed? What amenities does it offer?
This is the second factor in the office ROI equation.
Let’s expand on our hypothetical scenario above. Assume there are two options:
When you’re shopping for the right workspace, you’ll generally have two options:
- A traditional office space, sublease, or landlord–offered fully-furnished “show suite”
A serviced office/coworking space
Option A might cost you $15,000 per month.
Option B might cost you $25,000 per month.
It can be easy to lean toward the less expensive option. But in doing so, you’re only considering your bottom line—not your top line.
It’s also important to consider that finding, setting up, and managing office space is not your organization’s core competency.
You’ll undoubtedly need to pour a significant commitment of time, money, and resources into a DIY traditional office space, and it comes with a steep learning curve.
You’ll be in charge of all the legwork.
You’ll be responsible for figuring out what your employees want and building a space that caters to it.
And if you get it wrong, you risk putting your team in a workspace that doesn’t create better engagement, happier employees, or increased productivity—and negates the potential top-line benefits of achieving those goals.
On the other hand, Option B—serviced office/coworking space might look like the more expensive option.
But in reality, you’re simply outsourcing your workspace to seasoned operators and leveraging their years of experience in creating highly productive workspaces that attract and retain top talent—the same way you might outsource your CRM, PR, or marketing to drive top-line results.
Attracting top talent with engaging workspace experience is the core competency of flexible office space operators. They have a proven model that you can experience when you tour their spaces.
By outsourcing your workspace needs, you can save time and money while feeling confident you’ll be providing your team with a workspace where they want to be—and supercharging your workspace ROI in the process.
Today, determining the ROI of your workspace requires the consideration of multiple factors. But one thing is for sure: when calculating your office ROI, forget what it means for your bottom line and focus on the more relevant question: how will it enhance your top line?
If you want to see how seasoned experts curate a workspace experience that has been attracting Canada’s top talent for over a decade, book a tour of your local iQ Offices location today. We’d be happy to answer any of these questions you may have.
Kane Willmott is the co-founder and CEO of iQ Offices, the largest independent Canadian-owned co-working operator with offices in Ottawa, Toronto, Montreal and Vancouver. iQ Offices provides beautiful office spaces with safety, service, privacy and design at the forefront.