Rent, service charge, rates, annualised fit-out and running costs turned into a cost per desk, per employee and per desk-day used, with density as the lever that moves it most.
Cost per desk is total occupancy cost divided by the number of workstations: rent, service charge, business rates, annualised fit-out, running costs and a dilapidations reserve, over the desks the floor holds. On an illustrative 1,500 m² office at 10 m² per desk, the full cost is 9,430 per desk per year, 2.10 times the 4,500 of rent alone, and 68.34 per desk actually used once attendance is taken into account.
Worked in full in Office Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Occupiers budget by the desk and landlords price by the square metre, and the translation between the two decides what rent a tenant can pay. A floor that costs 450 per m² in rent is not cheap or expensive until you know how many people it holds and what else comes with it.
| Line | Per m² | On 1,500 m² | Per desk | Share |
|---|---|---|---|---|
| Rent | 450 | 675,000 | 4,500 | 47.7% |
| Service charge | 95 | 142,500 | 950 | 10.1% |
| Business rates | 140 | 210,000 | 1,400 | 14.8% |
| Fit-out, annualised | 163 | 244,562 | 1,630 | 17.3% |
| Utilities, cleaning, security | 70 | 105,000 | 700 | 7.4% |
| Dilapidations reserve | 25 | 37,500 | 250 | 2.7% |
| Total occupancy cost | 943 | 1,414,562 | 9,430 | 100% |
The floor is 1,500 m² of net internal area planned at 10 m² per desk, so 150 desks. The tenant spends 1,200 per m² on fit-out, 1,800,000 in total, and writes it off over a ten-year lease. Every rate here is illustrative; the method is what carries over.
Step 1. Annualise the fit-out at the occupier's cost of capital
Fit-out is paid on day one and used for ten years, so spread it as an annuity, not straight-line: 1,200 / 7.3601 = 163.04 per m² a year at 6 per cent. In Excel: =1200/PV(6%,10,-1).
Step 2. Add every line per m²
450 + 95 + 140 + 163.04 + 70 + 25 = 943.04 per m², or 1,414,562 a year on the floor.
Step 3. Multiply by the density
Cost per desk = total per m² × m² per desk = 943.04 × 10 = 9,430. Equivalently, 1,414,562 / 150 desks.
Rent is under half of it, 47.7 per cent. Business rates and the annualised fit-out together are another 32.1 per cent, and neither appears in the agent's quoting rent.
Most occupiers no longer provide a desk per person. At a sharing ratio of 0.7 desks per employee the floor supports about 214 people (150 / 0.7), and the cost per employee is 9,430 × 0.7 = 6,601. Turn it the other way: over 230 working days a desk costs 41.00 a day available, but at 60 per cent average attendance it is used on 138 days, so each desk-day actually used costs 68.34. That is the number finance directors increasingly see, and the one that drives decisions to give space back.
| m² per desk | Desks | Total per desk | Rent only per desk | Per used desk-day |
|---|---|---|---|---|
| 8 | 188 | 7,544 | 3,600 | 54.67 |
| 10 | 150 | 9,430 | 4,500 | 68.34 |
| 12 | 125 | 11,316 | 5,400 | 82.00 |
| 14 | 107 | 13,203 | 6,300 | 95.67 |
Density moves the answer as much as rent does. Housing the same 150 desks at 8 m² needs 1,200 m² and saves 282,912 a year, 20 per cent. By contrast, a rent of 300 instead of 450 at 10 m² per desk only takes the cost per desk from 9,430 to 7,930; at 600 it is 10,930. Rent is a large line, but not the only lever.
For the landlord this is the arithmetic of rent capacity. A tenant who budgets a cost per desk treats every other line as coming out of the rent. A service charge 15 per m² above the building next door is 150 per desk, 22,500 a year on this floor, or 3.3 per cent of the rent the tenant will try to negotiate away.
An occupier comparing two buildings compares cost per desk, not rent per m². A floor that plans efficiently at 8 m² per desk can carry a higher rent than one that needs 12 for the same headcount and still cost the tenant less: at the costs above, 7,544 per desk against 11,316. Floor plate depth, column grid and core position therefore show up in rent, and an owner deciding on a refurbishment should model density alongside the headline.
The landlord's mirror of this calculation, what the incentive package does to the rent actually banked, is in what headline rent delivers a target net effective rent, and the cost of the next re-letting cycle in the capital-adjusted yield.
Cost per desk is total occupancy cost per m² times m² per desk: 943.04 times 10, or 9,430 a year on this floor, and 68.34 per desk-day used. Density and the non-rent lines decide it as much as the rent. The free workbook for this case carries total occupancy cost and the service-charge gap alongside the headline-to-net-effective rent sheet.
Planning densities commonly sit between 8 and 14 m² of net internal area per desk, and the choice moves cost per desk almost proportionally. On illustrative costs of 943.04 per m², 8 m² per desk gives 7,544 a year and 14 m² gives 13,203. Always check which area measure the density is quoted on.
Divide total occupancy cost by headcount rather than desks. With 150 desks and a sharing ratio of 0.7 desks per employee the floor supports about 214 people (150 / 0.7), so an annual cost of 1,414,562 is 9,430 x 0.7 = 6,601 per employee, against 9,430 per desk.
As an annuity over the lease at the occupier's cost of capital, not straight-line. A 1,200 per m² fit-out over ten years at 6 per cent is 163.04 per m² a year, 1,630 per desk at 10 m² per desk. Straight-line would show 120 per m² and understate the cost by 430 per desk.
This article is one calculation from Office Real Estate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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