The experts at global corporate real estate services company Jones Lang Lasalle (JLL) know a thing or two about making informed estimates about the true costs of operating a business. They’ve advised investors, companies and tenants of every kind and size and that experience is what led them to develop what was at first their own rule of thumb but has since been borrowed across the industry — the 3-30-300 rule.
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Simply put, the rule states that for each square foot of space occupied by a corporate tenant, they will spend $3 on utilities, $30 on rent and $300 on payroll per year. Of course, the details will vary but the rule serves as a useful baseline and provides an easy way to quickly calculate the true costs of operation and separate the different line items involved in paying for an office space.
Highlighting these three areas and making them distinct can make it easier for companies to reduce their expenses by applying even small changes in each of them. The rule also provides an easy way to visualize the relative impact of changes — whether for better or worse — in the variables that affect the numbers involved.
In an age of opportunities created by smart buildings, the 3-30-300 rule can help you to make smart decisions about where and how to invest in your workspace.
Perhaps the most important takeaway from the 3-30-300 rule is found in that last number. Since it is an order of magnitude bigger than rent and two orders bigger than utilities, even small changes in employee productivity have the potential to make the biggest difference to total costs.
Let’s say you’re considering downsizing your office space or relocating to a less expensive location and the change can deliver a 10% decrease in rent costs. But if such a move, with its smaller or less comfortable environment, results in a 10% drop in staff productivity, then the 3-30-300 rule shows us that the math says the move doesn’t make sense:
A 10% decrease in rent (a savings of $3 per square foot) results in a 10% decrease in productivity (a loss of $30 per square foot).
The same idea applies to utilities. Even if a very significant savings of, say, 20% were somehow possible, it still doesn’t compare to even a very modest increase in staff productivity.
This is certainly not to say that reductions in rental or utility costs should not be pursued where possible. Lower costs are always welcome wherever they can be found. But the 3-30-300 rule shows us that gaining a small percentage improvement in a larger number should be a priority over larger percentage changes in much smaller numbers.
Want to make a bigger, more immediate impact on your operating costs? Focus on optimizing productivity before worrying about anything else.
Focusing on productivity means focusing on people and employee productivity is a direct product of their overall well-being, comfort, and mindset when they’re using the office space.
Stakeholders are very much aware of this now, as they use a new approach to designing workspaces in the post-pandemic office landscape. Faced with enticing a workforce that has operated remotely for an extended period of time, management is increasingly turning to IoT-powered tech solutions to make working from the office an entirely different and better experience than ever before.
The financial benefits of these changes can be expressed via the 3-30-300 rule. Again, because of the much larger investment in payroll, changes in the “300” part of the rule typically produce the biggest changes to your bottom line.
The results are clear. Anything that results in lower employee satisfaction or happiness is not likely to be worth the short-term savings. At the same time, even modest increases in productivity can offset increases in rent or utility costs.
Combined, these capabilities contribute to a workplace where it’s easier to concentrate, access the resources employees need, collaborate when needed, and generally do their best work.
From conventional brick-and-mortar retail to advanced, next-generation planned corporate office space, the 3-30-300 rule helps to plan budgets, conceptualize cost relationships, and more. But in this age of smart buildings, we would argue that it highlights the role of productivity in optimizing cost structures. If you’re looking for ways to boost productivity while making your office space a more attractive option for your staff, schedule a meeting with our team today.
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