How to Calculate Office Building Occupancy by Square Footage

For an office building owner, occupancy is a square footage measure. Divide the rentable area under commenced leases by the building's total rentable area, then multiply by 100. Count desks or employees only if you are measuring a tenant's workplace use. Those numbers do not tell an owner how much space is producing lease income.

The calculation

Office occupancy rate = occupied rentable square feet / total rentable square feet x 100. First choose an as-of date and a consistent definition of occupied. For a property operating report, count space under a commenced lease in the numerator. Use the same building measurement and exclusions each period so a change in the rate reflects leasing activity rather than a changed denominator.

This is consistent with the occupancy definition in Orion Office REIT's supplemental disclosure: occupied square feet are leased rentable square feet for which revenue recognition has commenced. The disclosure separately defines leased rate to include signed leases with future commencement dates. Douglas Emmett's office reporting definitions also exclude signed, not-yet-commenced leases from occupancy rate. These are reporting conventions, so label the convention on your own owner report rather than assuming every publisher uses the same one.

An office building example

Suppose the building has 100,000 rentable square feet. On the reporting date, commenced leases cover 80,000 square feet. Another 5,000 square feet is under a signed lease that has not started. The numbers are illustrative.

• Current occupancy: 80,000 / 100,000 x 100 = 80%.
• Current vacancy: 20,000 / 100,000 x 100 = 20%.
• Signed lease pipeline: 5,000 square feet within the currently vacant area. If that lease commences and nothing else changes, occupancy becomes 85%.

Do not count the future lease in current occupancy and then count it again when it starts. Record its commencement date, delivery obligations, and expected rent start separately. A signed lease can improve the outlook without producing current income.

Measure workstation use separately

A tenant planning its office layout needs a different calculation: workstations in use divided by workstations available, multiplied by 100. Record the observation date and time. An employee roster or a desk reservation does not establish that a workstation was in use.

For an illustrative Tuesday observation at 10 a.m., 30 of 50 available workstations are in use: 30 / 50 x 100 = 60%. That is a snapshot of desk use, not the building's leased-square-footage occupancy. Identify which desks are available and disclose any exclusions.

For a period average, observe at the same chosen times each workday and average those snapshot rates. Label the dates, observation times and available workstation count. If the available count changes, calculate each snapshot with its own denominator. A morning-only sample may miss afternoon demand.

Compare the busiest observations with desk assignments, reservations and team needs before changing the layout. These observations help a tenant assess workplace use; they do not establish a building-code maximum occupant load or replace the owner's lease calculation.

Check the inputs before relying on the percentage

Start with the space inventory and rent roll. Reconcile each suite's rentable area, tenant, lease dates, and current status. Check whether a tenant has surrendered a suite, is holding over, or has leased space that is being built out. Decide how building-management space or space taken out of service is treated, and disclose the choice. The numerator and denominator must follow the same rule.

Then read occupancy beside collections and upcoming expirations. An 80% occupied building can still have unpaid rent or a large lease rollover. A tenant may also lease a floor while using only part of it. Workplace utilization is the tenant's separate measure; it should not replace the landlord's rent-roll calculation.

For a monthly report, show the rate at month-end and the suites that changed status. If the owner needs an average for the month, calculate it from dated observations and label it as an average. A single month-end snapshot cannot tell the owner when the vacancy began.

Turn the number into a leasing decision

The rate tells you how much space is under commenced leases. The useful follow-up is which suite is vacant, why it is still vacant, what work or pricing decision is pending, and which lease expires next. Coastline's commercial property management services include leasing and owner reporting. If your office rent roll and occupancy report do not agree, request a Property Management Performance Review so the building's records and next decisions can be discussed.

The review starts with a conversation about a Southern California commercial property. Share the property type, location and occupancy-report question first. Do not send lease or financial files through the initial form.