Office space can pay for itself with improved productivity

Rent and facility costs are often a small fraction of payroll.

A useful rule of thumb is that facility costs are 10% of wages, If an office can boost productivity by 10%, it pays for itself. Conversely, if eliminating an office reduces productivity by 10%, it hasn’t improved net revenue.

Many studies point to properties of work environments boosting productivity at 10% or more. Office noise can reduce memory, motivation and energy by about ten percent.

Putting two people nearby each other might be the most powerful easily-available way to catalyze collaboration outside of top-down methods. New technologies that make the office even more useful will likely increase the productivity effect of the office. An important implication is that decisions about reducing office space should be made for reasons other than cutting costs. Reducing space might be the right decision, but because it’s right for an organization for other reasons, not cost savings.

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- Microsoft New future of work report 2023.