Say occupancy costs (all in) are $60 psf. Now assume occupancy is around 1 employee per 200 sf (inclusive of indirect circulation space). That means occupancy cost per employee is $60 x 200 = $12,000. Now make some assumptions about the total labour cost (salary, bonus, benefits, etc) - say $200k - and look at how little the occupancy costs are relative to that - 6% with these examples.
Jam more people in so you get it down to 1 employee per 150 sf, and you've saved $3,000 per employee, or 1.5% occupancy to labour, which can easily be lost in terms of decreased productivity with people shoulder to shoulder.
Lesson: You need only a very, very small change in productivity to counter any savings in relation to occupancy. And not just in terms of productivity of existing employees, but also the cost of lost productivity due to lower retention, or lost productivity due to more sick days given the closer proximity. This is why I've never understood why companies go anywhere but the best locations with the nicest office space... People really are the major cost and the only asset a company has. Do everything you can to make them love every second at work. The added cost of free food, nicer office, better location, etc is insignificant.
Say occupancy costs (all in) are $60 psf. Now assume occupancy is around 1 employee per 200 sf (inclusive of indirect circulation space). That means occupancy cost per employee is $60 x 200 = $12,000. Now make some assumptions about the total labour cost (salary, bonus, benefits, etc) - say $200k - and look at how little the occupancy costs are relative to that - 6% with these examples.
Jam more people in so you get it down to 1 employee per 150 sf, and you've saved $3,000 per employee, or 1.5% occupancy to labour, which can easily be lost in terms of decreased productivity with people shoulder to shoulder.
Lesson: You need only a very, very small change in productivity to counter any savings in relation to occupancy. And not just in terms of productivity of existing employees, but also the cost of lost productivity due to lower retention, or lost productivity due to more sick days given the closer proximity. This is why I've never understood why companies go anywhere but the best locations with the nicest office space... People really are the major cost and the only asset a company has. Do everything you can to make them love every second at work. The added cost of free food, nicer office, better location, etc is insignificant.