Optimising occupancy costs: Striking the right balance between cost and value

Managing occupancy costs is an uphill task due to various dynamics involved in planning strategically the right sizes of the real estate portfolio and ensuring that the organisation utilizes its space efficiently and effectively. Accurately measuring the occupancy costs can be a competitive advantage, thus contributing to organisation’s profitability. However, occupancy optimisation is difficult to achieve without proper planning, strategising and striking a balance in supply space and demand continuum. There is always some scope of improvement in occupancy optimisation that positively impacts both financial and non-financial operating conditions in the organisation. The lack of planning in occupancy cost can result in higher expenses, thus increasing the cost to the company. However, a better planning and well-defined processes can help in optimising occupancy costs without compromising on the operating standards. Some of the simple steps to control occupancy costs are as follows:

Managing Expenses:

The P&L manager should be aware of all components of his expenses and measure the impact in terms of space optimisation and cost. He should have knowledge about the cost incurred on leasing, parking, office overheads, admin and legal. A better understanding of these aspects can always help in timely planning and reducing facility operating costs.

Benchmarking:

The next step to reduce operating cost is to benchmark the existing operating cost on month-on-month or year-on-year basis in order to limit the overall cost and embrace measures to reduce the same. An effective analysis will ensure timely decision making and deciding the way forward.

Use Web-based Solutions:

Deploying new technologies can result in improving occupancy cost of the real estate portfolio and effective decision-making with advanced cost analysis/projection capabilities. Additionally, it will provide visibility that will help in aligning occupancy cost structure with the organisation’s mission. Thus, leveraging new technologies can minimise frequency and expense of errors and reduce administrative overhead by eliminating manual processes.

Leverage Technology:

There should be immense use of technology tools for various administrative processes such as help desk, visitor management, PPM execution that will result in less manpower and vendors, thus reducing time and costs.

Outsourcing:  

Many organisations outsource their task to IPCs specialising in optimising occupancy cost by adopting an integrated approach and developing an occupancy optimisation program that can deliver sizeable and recurring savings to the organisation.


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