Chapter 10
Shifting Space Allocation and Chargeback Methodologies
Global Occupancy Insights 2021-2022
5 Minute Read
Allocating space in a hybrid age
Space allocation and chargeback programs are foundational for effective occupancy management.
These programs help organizations provide an equitable way to allocate the total cost of occupancy back to their businesses that occupy the space. The shift to hybrid work requires a more sophisticated method of measuring and planning for space demands. As one of the largest costs for organizations, proper allocation of the total cost of occupancy (TCO) can drive value across an enterprise.
Common terms and definitions are as follows:
SPACE ALLOCATION METHODOLOGY
A methodology that assigns each space within a portfolio to either assigned, floor common, building common or campus common. Assigned spaces are tied to a business unit cost center and common spaces are tied to an allocation methodology—floor-shared, building-shared, or campus-shared—that are prorated back to the assigned spaces.
SPACE CHARGEBACK PROGRAM
A program that assigns a cost center allocation for business unit/departmental chargeback
COMMON SPACE
Space used commonly by all the businesses that occupy the floor, building or campus (e.g., open or closed collaboration spaces, lobby areas, circulation, cafes, cafeterias, fitness centers, prayer rooms, lobby, reception, etc.)
The shift to hybrid work requires a more sophisticated method of measuring and planning for space demands.
How space is allocated and charged back
Three-fourths of respondents report that they allocate spaces to business units (Figure 52), with 83% prorating common spaces, 70% prorating closed collaboration spaces, 78% prorating open co-location spaces and 50% prorating neighborhood space back to the occupants assigned to that neighborhood (Figure 53).
Figure 52: Does your client allocate space to different business units/organizational levels?
Note: Based on 48 respondents.
Source: CBRE Global Occupancy Insights Report, 2021.
Figure 53: How is common space allocated? (cafeterias, lobby, etc.)
Note: Based on 40 respondents.
Source: CBRE Global Occupancy Insights Report, 2021.
Sixty-nine percent report that they use their allocation to chargeback the space, with 31% using area by rentable sq. ft. or sq. m., 17% using area by usable sq. ft. or sq. m. and 8% using headcount per business unit as a percent of total headcount.
Frequency of these chargebacks are mostly annually at 39%, 33% conduct the chargeback monthly and only 6% report doing the chargeback quarterly.
As mentioned above, there are many benefits of allocating and charging back space. Respondents rank the ability to chargeback the space to the business units as the top benefit (Figure 55), followed by being able to identify cost savings and avoidance opportunities, and understanding the ownership by sq. ft. or sq. m. in the portfolio.
Figure 54: How frequently does your client chargeback to the business units?
Note: Based on 36 respondents.
Source: CBRE Global Occupancy Insights Report, 2021.
Figure 55: What is the top benefit realized by your client's corporate real estate for allocating space?
Note: Based on 36 respondents.
Source: CBRE Global Occupancy Insights Report, 2021.
Figure 56: Benefits and requirements of a chargeback program
Source: CBRE Global Occupancy Insights Report, 2021.
Notably, 31% report that they are currently considering changes to how they allocate and charge back space in the future (Figure 57), likely due to the growing adoption of hybrid working and the availability of more utilization data.
Figure 57: Is your client considering changes to future space allocations/chargebacks? (possibly due to pandemic, availability of utilization data, other factors)
Note: Based on 48 respondents.
Source: CBRE Global Occupancy Insights Report, 2021.
Figure 58: Space charge methodology
Source: CBRE Global Occupancy Insights Report, 2021.
Corporate occupiers are finding that space allocation methods, especially those that are automated (producing real-time data without human error), provide numerous benefits over the more manual methods of the past. These include increased transparency and a more thorough understanding of how assets are being utilized, which forms the foundation for building “what-if” scenarios and facilitating accurate chargebacks to business units.
The future of chargebacks
As utilization solutions become more economical, they will also become the norm, resulting in the automation of the chargeback process. This sets the stage for a fully integrated system that engages human resources, finance and other key corporate stakeholders. Property cost chargebacks, traditionally based on headcounts or assigned area, will be based on actual usage. Tracking chargebacks with utilization data can also encourage desired behaviors and discipline in acquiring and relinquishing space.
This shift in space allocation provides new opportunities for chargeback methodologies and programs that increase visibility and transparency in reporting. It also offers the opportunity to drive business cases for workplace consolidation and improvement. Other benefits are the real time availability of space demand and the support of activity based and hybrid work models. The data also feeds the rightsizing of spaces across a building or portfolio.
There are, of course, key requirements for accurate space chargebacks, including clearly defined space principles, consistent and accurate data input relating to people and places, and calculating total occupancy costs for different settings. This list should also include a mechanism user friendly enough to allow businesses to model future scenarios with cost implications.
The growth of hybrid working will drive the need for organizations to consider transparent, dynamic cost allocation models, identify all potential data sources, achieve greater clarity by incorporating HR information into data, and incentivize business units to reduce their footprints.
This shift in space allocation provides new opportunities for chargeback methodologies and programs that increase visibility and transparency in reporting.