Where Are We At: Occupancy Levels
What is the difference between office space occupancy and office space utilisation? In essence one is used by the supply side of the office equation (Lessors), and the other is used by the demand side of the equation (Lessees). We look at “occupancy”.
Here is an example of office occupancy as viewed by many. If you have an office of XXXX m2 and 50% of that space is occupied, the office is deemed occupied. If only 20% of the space is “occupied” the office is still occupied. It’s true. The lights are on, and someone is home. The “office” in this line of thinking, is the whole space not part of the space.
To put this into further context, an organisation leases 10 floors and is not using 5 of those floors. Those 5 floors do not make it into the industry standard vacancy figures until the end of the lease or until the space is officially on the market being subleased. If they are not available for sublease, they are not counted in vacancy figures even though they are vacant.
This situation is no different to the market in the early 90’s. There were all sorts of names for this unoccupied space phenomenon; hidden vacancy, ghost vacancy, see-through buildings to name a few.
Based on supply side thinking, high vacancy is here to stay for a long time while we wait for that space to come back online and to become unoccupied.