How much is Working From Home worth? A dashboard for calculating office rent savings
Working from home has become the new normal. How will this change office space expenditures?
The Corona crisis has drastically changed how we interact. Almost overnight, a 1.5-meter bubble grew around each of us. We quickly became accustomed to wearing masks, waiting in line to enter the grocery store, and taking fewer trips.
Many people also quickly became accustomed to working from home. For some, this may have already been the norm for one or two days a week. But for others, they and their employer had to suddenly grapple with an entirely new way of work. Nationwide, one of the largest insurance companies in America, transitioned nearly all of its 28,000 employees to completely remote working arrangements within only 5 days. Before the crisis, less than 6,000 of the company’s employees occasionally worked from home. After realizing that their KPIs remained constant even as nearly all associates shifted to working from home, the company announced they would not shift them back. They now plan to downsize from 20 physical locations to only 4 and shift those workspaces to their employees’ homes.
With massive companies like Nationwide and Twitter shifting rapidly to primarily-work-from-home models, we can expect that very many other smaller companies will do the same. We wanted to know just how much this shift will impact commercial real estate markets, and how much employers can expect to save by shifting to a full- or part-time work-from-home model. We also wanted to make something interactive — where other curious people could plug in their city and company size and see just how much they could save.
In this article, we walk through how we made a simple online dashboard for calculating how much companies can save if they downsize their offices and encouraging their employees to work partly or completely from home.
We started this project by asking ourselves what information we would need to calculate savings for a company moving to a work-from-home model. In a perfect world, we would have data on how many employees each company has, what percentage of these employees already work from home, and how much each company pays monthly to rent their office space. Since we can’t call up every company in the world affected by the global pandemic and gather this data, we have to improvise and make some assumptions.
As a start, we narrowed our focus to Germany. We then set out to estimate the rest of our desired data points for this specific market — namely, how many employees each company has and how much they pay in rent on the office space where those employees work. We knew that Germany has some strict rules about office space, with guidelines like how much space an office must have for each employee. It turns out the exact number is 12–15 square meters per employee, which is quite large. This doesn’t mean the exact working station of each employee needs to be the size of a normal bedroom — each workstation needs to only be about 1.5 meters wide by 1.5 meters deep. This means that this 12–15 square meters value can be a good proxy for total office space per employee, including space occupied by things like hallways, bathrooms, and the communal office kitchen. We can use to this to calculate total rent expenditures for any given number of employees if we know the average price per square meter of office space.
We found information on the office space rent for different cities in Germany from the Zentrale Immobilien Ausschuss (ZIA), one of the main umbrella organizations for real estate in Germany. They publish a yearly report on major trends in commercial real estate, including average price per square meter. They don’t report exact average price for every city, but rather rank cities in four price tiers- with major metropoles like Munich and Frankfurt lining the first tier, medium-sized cities like Bonn and Mainz in the middle tiers, and smaller cities like Chemnitz and Bamberg in the bottom tier. For each of these tiers, the ZIA provides the average price per square meter and information about price changes in the cities over the years.
Using this data from the ZIA annual report, together with the information about legally mandated office space, we can easily estimate savings from moving employees out of the office and into their homes. We start by calculating the approximate rent an employer would pay if all of their employees were working at the office by simply multiplying the average rent in their city per square meter, times the number of employees, times the square meters per employee (either 12 for a normal office, or 15 for spacious).
Then, to calculate savings, we simply use the number of days the employees are working from home and reduce the total rent by that proportion of days.
03 Web App
To see how much working from home for a few days per week could save employers on rent, you can have a go here. The app was made using Dash by Plotly, which essentially lets you use CSS and HTML code together with Python to create dashboards. What’s great about Dash is that it’s interactive. In our dashboard, the interactive components include a map of Germany listing the average commercial space rent in each city, which appear when moused over, and a stacked bar chart that automatically updates savings when the drop-down selectors are updated.
We then hosted the Dash app with Heroku so that it can be seen and accessed by anyone with an internet connection, rather than only working on a local machine.
Our app shows clearly that the savings from office space rent alone are substantial. As an example, consider a startup in Berlin with 15 employees. Our dashboard shows that if they shifted their employees to working from home 3 days per week, they could save over €4,000 per month. This alone is enough to hire a new employee — and it doesn’t even count money saved on things like free coffee and fruit for the employees, electricity for a larger office space, and office supplies.
Coming out of the Corona crisis and imposed lockdowns, we can expect to see many business leaders making the kinds of calculations we’ve modeled here with our web app. We also imagined that our dashboard could be a useful tool for employees trying to negotiate with their employers to keep working from home even after stay at home orders are lifted.