When it comes to your real estate, don’t be penny-wise and pound-foolish

Real estate costs do not end at price per square foot, says the 3-30-300 principle.

Andy O'BrienWhen looking for a new office space, no doubt shaving a few bucks off the total cost-per-square-foot is at the top of your list. After all, a mere $3-$4 savings per square foot can save you hundreds of thousands of dollars per year in some cases.

But before you sign up for that bargain-basement space, consider the old adage about being penny-wise and pound-foolish. What if that $3-$4 in savings actually created a net-loss for your business? What if that cheaper office on paper is actually more expensive in the long run, due to a negative impact on employee engagement and productivity?

Most organizations focus on reducing utilities and direct real estate costs. However, they overlook the impact that workplace improvements can have on reducing costs associated with their most valuable and costly asset: human capital. That’s where the “3-30-300℠ Principle” comes in.

The “3-30-300℠ Principle” refers to a company’s balance of energy, real estate and workforce costs. Typically, for every $3 a company pays per square foot annually for energy costs, its real estate costs will come in at approximately $30, and the cost of its workforce will be a comparable $300. And yet, many cost savings initiatives focus on the $3 and the $30—not the $300.

The purpose of this example is to help put an organization’s effective operating costs into better perspective. With energy representing approximately $3 per square foot, energy savings merely scratches the surface of the overall value proposition for smart buildings. Using sensor technologies to understand how occupants actually use space has the potential to reduce the $30 real estate costs by a factor of 10x the energy costs. And because a company’s largest expense is often its payroll, at $300 per square foot, if you use smart building technology to offer customizable and controllable environments to increase employee productivity and tenant satisfaction, the value can be upwards of 100x the energy costs.

So when considering your investment in office space, think about your employees’ productivity. Will the basement office help you get the most out of your payroll spend? It might be worth paying for light-filled space with smart building temperature controls if it keeps your employees working productively.

In fact, studies have shown a direct relationship between the office environment and employee productivity. Buildings that offer fresh air and more natural light have been shown to increase employee productivity by as much as 18 percent. Offices that foster employee health and well-being can reduce absenteeism, lower attrition, improve cognitive functioning, increase output, improve productivity and strengthen recruiting.

What office space factors have the most impact on your people’s productivity?

According to a 2013 World Green Building Council report, there are eight factors specific to sustainable building design that impacts employee health, well-being, and productivity. When optimized, these factors result in bottom-line business benefits due to their positive impact on occupants, and should be top considerations when searching for a new office space:

  1. Thermal comfort
  2. Indoor air quality
  3. Access to natural light
  4. Task lighting and computer screen glare reduction
  5. Visual resting spots and references to nature, such as plants, artwork, décor and landscape views
  6. Sound control
  7. Office layouts that correlate to the types of work being performed, including employee interactions, collaboration and “head-down” private space
  8. Proximity to bicycle stands, workout and shower facilities, and health amenities and programs

Invest in Worker Productivity and Satisfaction

Smart buildings are changing the way people work and how buildings work for employers and their employees. As businesses begin to recognize the opportunities that today’s technologies can deliver, they are beginning to rethink their workplace strategy. A dynamic, smart workplace is interactive and responsive to the needs of the people who work there, creating a better work environment. So if you think a smart building may be out of your financial reach, consider this: smart buildings not only help attract top talent, they also motivate employees to come to work ready to deliver value to the organization every day.

While smart buildings help deliver energy savings and impact the $3 average energy costs, smart organizations will recognize the exponential value technology can deliver to the $30 and $300 part of the equation. By maximizing the largest investment, in people, companies can quantify the true ROI of healthy, sustainable workplaces.