What is total occupancy cost, and how is it calculated?

How it works

Rent is only part of the bill. Total occupancy cost adds every recurring cost tied to the space: service charges or common area maintenance, utilities, property taxes, insurance, repairs, cleaning, security, reception, and the cost of fit-out and furniture spread over the years they last. Some organizations also include facilities staff and workplace technology.

The total is then divided by a unit so buildings can be compared. Cost per square foot compares buildings with each other. Cost per seat shows what each workstation costs. Cost per employee, or per person who actually comes in, shows what the space costs for the way people use it.

In hybrid workplaces the last view matters most. A building can look efficient per square foot and still be expensive per person present if most desks sit empty, which is why teams read occupancy cost alongside measured occupancy.

Formula

Total occupancy cost = Rent + Operating expenses + Utilities + Services + Annual fit-out cost

Rent: Base rent for the year, or the equivalent ownership cost for an owned building.
Operating expenses: Service charges or common area maintenance, property taxes and insurance.
Utilities: Electricity, heating, cooling and water paid by the occupier.
Services: Cleaning, security, reception, maintenance and repairs.
Annual fit-out cost: The cost of fit-out and furniture spread over the years it is expected to last, often the lease term.

Worked example · illustrative figures

An office of 20,000 square feet has annual rent of $900,000.
Operating expenses are $200,000, utilities $60,000 and services $140,000 a year.
A $1,000,000 fit-out spread over a ten-year lease adds $100,000 a year.
$900,000 + $200,000 + $60,000 + $140,000 + $100,000 = $1,400,000.
$1,400,000 ÷ 20,000 sq ft = $70 per square foot; with 200 employees, $1,400,000 ÷ 200 = $7,000 per employee.

Total occupancy cost: $1,400,000 a year, or $70 per square foot and $7,000 per employee.

How to measure it

Collect every cost line for the same twelve months: lease, service charge statements, utility bills, facilities contracts and the fit-out depreciation schedule.
Use one area standard, rentable or usable, for every building before dividing by square feet.
Report cost per square foot, per seat and per occupied seat, where occupied seats come from check-in or presence data.
Track the trend each year and before each lease event, not just a single snapshot.

Examples

In the worked example, if an average of 80 people use the office each day, the cost per person present is $1,400,000 ÷ 80 = $17,500 a year.
Two offices cost the same per square foot, but one is twice as busy, so its cost per occupied seat is half the other's.

Benchmarks

Consolidating two floors into one saved RCS England over £40,000 a year.
Kadence customer story: RCS England

Common mistakes

Counting rent only, which leaves out a large part of the real cost.
Mixing rentable and usable square feet across buildings, which makes per-square-foot comparisons meaningless.
Dividing by headcount in a hybrid workplace, which hides what each occupied seat really costs.
Leaving one-off move, fit-out and exit costs out when comparing a move with staying put.

How Kadence helps

Kadence Workplace Insights supplies the use side of the calculation: attendance, occupancy and no-shows by building and floor, with CSV export, so finance can divide total occupancy cost by the seats people actually use. The Kadence ROI calculator estimates the space and rent a desk-sharing ratio could release, and SpaceOps compares consolidation scenarios side by side.

Workplace analytics · ROI calculator · Scenario planning

Frequently asked questions

What is included in total occupancy cost?

Rent or the ownership equivalent, service charges or common area maintenance, property taxes, insurance, utilities, cleaning, security, reception, maintenance and repairs, plus the yearly share of fit-out and furniture. Some organizations add facilities staff and workplace technology. Whatever you include, use the same list for every building.

How do you calculate occupancy cost per employee?

Add up the total occupancy cost for the year and divide it by the number of employees based at the site. In a hybrid office, also divide by the average number of people who actually come in, because that shows what each used seat costs.

What is the difference between rent and occupancy cost?

Rent is what you pay the landlord for the space. Occupancy cost is everything it takes to use the space: rent plus operating expenses, utilities, services and the cost of fitting it out. Two buildings with the same rent can have very different occupancy costs.

Why does occupancy cost per person rise with hybrid work?

The building costs the same whether people come in or not. When fewer people use it each day, the same total is spread across fewer occupied seats, so the cost per person present goes up. That is why hybrid organizations review space size against measured attendance.

How do I prove office utilization to my CFO?

Show what the space costs next to how much of it is used, by building and floor, from measured presence rather than bookings or headcount. Multiplying total occupancy cost by the share of seats empty on a typical day puts a cost on empty space; treat it as an upper bound, because space can only be released down to peak demand. A figure tied to measured attendance is easier to defend when finance asks how it was worked out.

Cost per seat The total annual occupancy cost of an office divided by the seats it provides, or by the seats actually used.
Space per person Office floor area divided by the number of people it serves, in square feet or square meters per person.
Corporate real estate (CRE) The buildings and leases a company occupies for its own operations, and the team that plans and manages them.
Rentable vs usable square feet Usable area is the space a tenant occupies; rentable area adds a share of common areas, and rent is charged on it.
3-30-300 rule A rule of thumb: per square foot each year, a company spends $3 on utilities, $30 on rent and $300 on its people.

Kadence editorial team · Last reviewed October 6, 2026