1. Partnership. Performance.1
An Avison Young White Paper
OCTOBER 2015
Executive Summary
Research has shown that reducing commuting times
by promoting alternate types of transportation
is good for a company’s bottom line. In this white
paper, we discuss in detail the three arguments why
corporations should support reducing the number of
employees who commute using their own personal
vehicles: Cost savings for the employees and the
corporation, improved employee quality of life, and
better local air quality.
Corporations are seeing a shift in employee expectations
of their work environment. Today, employees are as
interested in balancing work-life priorities as they are in
compensation. A big component of work-life balance is
commuting, and the less commuting employees have to
endure, the better their morale, overall quality of life and
cost of living.
The most significant financial benefits associated
with reduced employee commuting are related to
improved employee productivity and direct parking
costs. Corporations that occupy office buildings pay
handsomely for the luxury of parking garages. Parking
expenses include the cost of the garage, which is
included in the rent, and the additional monthly charges
associated with a company’s reserved and unreserved
parking spaces. The goal of the corporation should be
to minimize the portion of the rent that covers parking
costs, since parking structures are merely a necessity
to accommodate vehicles and do not add direct
operational value to the user of the building. To reduce
parking costs, corporations need to reduce employee
demand for parking spaces.
There are three primary strategies that corporations
can use to minimize the use of personal vehicles, along
with the associated need for parking. First, employers
can implement commuting benefits programs, wherein
employees are financially incentivized to use public
transit, or ride-share with other co-workers or occupants
of the building. Second, implementing enterprise-wide
technology that supports a mobile work environment
would allow employees to work remotely and avoid
driving to the office every day. Third, relocating to
office space within a transit-oriented development
(TOD) whereby employees can live, work and play in a
compact, pedestrian-friendly community that has easy
access to public transportation. This makes it possible for
employees to live a lower-stress life without complete
dependence on a car for mobility and survival.
It is clear that the majority of employees do not like
to commute and prefer to work for a company that
offers alternatives to long daily drives to and from
work. In a rapidly changing transportation industry
– with companies like Uber, Lyft and Car2go offering
alternatives to commuting with a personal vehicle –
corporations would be wise to conduct an employee
drive-time analysis, a parking-demand analysis, and an
employee survey to gauge attitudes toward strategies
that encourage a mobile workforce using alternate
means of commuting.
Why commute?: A business case for boosting bottom lines and
employee productivity
2. Introduction
The focus of this white paper is to provide evidence
in support of the argument that corporations should
promote taking cars off the road by encouraging
employees to use mobile workplace technology and
alternate means of transportation. We discuss the three
most compelling benefits for companies that have already
explored this option and the three most effective ways for
corporations to reduce the number of employee vehicles
travelling to and from corporate offices.
At Avison Young, we are starting to see a new trend with
corporate clients who are looking to relocate their offices:
More than any other consideration, corporations are
increasingly interested in conducting an employee drive-
time analysis to weigh the costs and benefits of relocating
to a location that may have higher rental rates, but shorter
commuting times versus a location with lower rental rates
and longer commuting times.
What are the typical results of an employee drive-time
analysis? There are three common realizations: Reducing
employee vehicle traffic to and from offices can lead to
an overall cost reduction for corporations and employees,
improved employee quality of life and better local air
quality.
The potential for cost reductions
Reducing the number of vehicles travelling to and from
the office could save money for both the corporation,
through reduced parking costs, and the employees,
through lower transportation costs (e.g. fuel, maintenance,
depreciation, tolls and parking).
Corporate cost savings
Corporations can save on the parking costs associated
with renting a parking garage. If a large number of
employees choose alternate means of transportation,
corporations can plan for smaller parking garages,
which would ultimately decrease project costs for
developers and the rental costs associated with parking
for corporations. Smaller garages could also provide an
opportunity for better space utilization, increasing the
level of productive office space.
Better space utilization translates into higher employee
density per square foot. According to a 2012 NAIOP report,
the average square footage per employee in North
America is 176 and is projected to drop to 151 in 20171
. At
our own corporate headquarters in Toronto, we have been
able to optimize space to an average of 150 square feet (sf)
per person.
For corporations, parking garages are viewed as
a necessary cost rather than a value-added asset;
therefore, parking garages should be just large enough
to accommodate the minimum number of vehicles
needed for business purposes. Also, at our own corporate
headquarters in Toronto, by locating in a TOD, 81% of our
Partnership. Performance.2
Why commute?: A business case for boosting bottom lines and employee productivity
1. NAIOP, “Changes in Average Square Feet per Worker,” NAIOP Commercial Real Estate Development Association, September 2012.
Increase Productivity
Through Improved
Quality of Life for
Employees
Corporate and Employee Cost
Savings
Improve Local
Air Quality
Corporate Benefits of
Reduced Employee Commuting
3. Partnership. Performance.3
Why commute?: A business case for boosting bottom lines and employee productivity
employees come to work without driving their own
vehicle, thereby reducing the number of parking spaces
needed, and associated costs, by a similar percentage.
Cost savings for employees
By driving personal vehicles to the office less frequently,
employees can reduce their annual cost of commuting.
The less employees have to drive to work, the less
they will spend on transportation costs. And, since
commuting costs are not tax-deductible, the potential
savings are significant (all figures are in U.S. dollars). In
fact, according to the U.S. Department of Transportation
(DOT), the average one-way commute from home
to work is 26.4 minutes, or 15 miles (24 km)2
, which
at today’s fuel price of about $2.3 per gallon3
and an
average fuel efficiency of 23.4 miles (37.7 km) per gallon4
,
costs employees about $3 per day – or about $60 per
month –in fuel costs alone.
To obtain a better picture of the full cost of commuting,
one can look at the U.S. Internal Revenue Service
(IRS) business mileage deduction rates for 2015. The
IRS allows for a $0.55-per-mile deduction of business
mileage (excluding the mileage to and from work).
Using this $0.55-per-mile IRS deduction as a reasonable
estimate for the full cost of commuting, the average
30-mile (48-km) commute costs $16.50 per day, or $330
for the standard 20-day work month. Avoiding this cost
and the associated time spent commuting could be an
important factor in attracting top talent and improving
employee job satisfaction.
Moreover, the IRS permits tax-free commuter
benefits for employees that use alternate modes
of transportation: In 2015, companies are allowed
to exclude from employees’ wages up to $130 per
month for combined commuter highway vehicle
transportation5
and transit passes and $20 per month for
bicycle commuting expenses.6
The true cost of parking
The cost of construction for a single parking space
depends on its size. According to estimates obtained
from HWA Parking7
– experts in parking planning and
design – the typical parking space measures eight feet,
six inches by 18 feet (153 sf) in downtown buildings
and nine feet by 18 feet (162 sf) in suburban markets
throughout North America. But each parking space also
requires a certain amount of space for moving in and
around the garage.
PARKING CONSTRUCTION COSTS
(All figures in U.S. dollars):
Cost per space = $14,000 (350 sf x $40 psf)
(Case 1) A 300,000-sf class A building with a parking ratio of
4/1,000 sf:
This parking garage would contain 1,200 spaces and cost
about $16.8 million to build.
(Case 2) A 300,000-sf class A building with a parking ratio of
2.5/1,000 sf:
This parking garage would contain 750 spaces and cost about
$10.5 million to build.
THE ANNUAL COST TO THE TENANT:
Assuming: A total construction cost per space of $14,000 (as
calculated above), and a capitalization rate of 8%.
The additional annual net rent cost per parking space is $1,120.
(Case 1) The annual net parking cost for the tenant is
$1.3 million.
(Case 2) The annual net parking cost for the tenant is
$840,000.
1
The parking ratio is the number of parking spots available divided by a
building’s total square footage. Municipalities often set minimum parking
ratio requirements.
A SAMPLE PARKING COST ANALYSIS
2. U.S. Department of Transportation, Omnistats, Volume 3, Issue 4, October 2003.
3. U.S. Energy Information Administration, “Gasoline and Diesel Fuel Update,” September 14, 2015.
4. Bureau of Transportation Statistics, “Average Fuel Efficiency of U.S. Light Duty Vehicles,” U.S. Department of Transportation, March 12, 2014.
5. To qualify, the vehicle must have seats for at least six adults (excluding the driver), and employees must occupy at least one-half of the passenger seats. Furthermore, the
vehicle mileage needs to be at least 80% related to transporting employees between home and work.
6. Department of the Treasury, Internal Revenue Service, “Employer’s Tax Guide to Fringe Benefits,” December 14, 2014. p. 23.
7. HWA Parking, “Commercial Parking Garage Planning,” HWA Parking, June 15, 2015.
Source: HWA Parking and Kirksey Architecture
4. Partnership. Performance.4
Garage efficiency, the ratio of garage square footage to
the number of parking spaces, may vary considerably
depending on site constraints and whether the garage
is a stand-alone structure or features a podium-parking
design. A conservative garage efficiency rating is
approximately 350 sf per space. Therefore, a 1,000-space
facility would total 350,000 sf.
What do these space figures mean in terms of costs?
According to a report from Kirksey Architecture, a
construction cost of $40 per square foot (psf) was a good
estimate for urban downtown sites in Texas in 2014.8
The
overall parking costs could be calculated based on the
example on page three. In the end, a cost-benefit analysis
weighing the increased real estate costs associated with
locating offices in more commuter-friendly locations,
and the savings arising from reducing the number of
employee vehicles travelling to and from the office, will
typically show that fuel and parking-cost savings dwarf
any increases in building rent expenses.
Reductions in commuting times
lead to better quality of life
Implementing policies to encourage or support alternate
modes of transportation could also have positive impacts
on employees’ quality of life. These, in turn, could improve
business performance in a number of ways, namely
through improved recruiting, retention and employee
health – all of which have a positive impact on overall
business performance.
For example, employees who avoid long commutes are
often more productive at work. Research from the Boston
Brigham and Women’s Hospital found that productivity
decreases for every hour that a person is awake9
. A long
commute could, therefore, be wasting an employee’s
most productive hours. For the average commuter, this
wasted time amounts to about 52 minutes per day,
4.3 hours per week, and 17.3 hours per month. Also,
employees simply do not like to commute: A 2006 study
by Kahneman, Krueger, Schkade, Schwarz and Stone
asked 900 Texas women how much they enjoyed a
number of common activities.10
Commuting was the least
desirable activity of all.
Recruiting top talent
Competitive wages alone are no longer enough to attract
the top talent. More and more, employees are looking
for jobs that offer a good work-life balance. This point is
especially true in the case of millennials. It has been well
“Inallourorganizations,payrollisprobably
the biggest line item in any business’
budget. No matter what industry the team
achieves the dream. So, today, business
leaders must think of the workplace
regardless of size or location as an
environment that helps employees to do
their jobs with maximum effectiveness, as
well as being highly supportive of their
needs and desires as people, not assets.
Giving employees a choice on how and
where they work and options on accessing
the workspace – even remotely – supports
this objective.”
Elizabeth Dukes, EVP and Co-founder, iOffice, Inc.
Average time
wasted
commuting
17.3
HOURS PER MONTH
8. Kirksey Architecture, “Construction Cost Update 2015, 15th Annual,” Kirksey Architecture, May 14, 2015.
9. Joseph O’Leary, “Sleep Deprivation Makes You Work Slower: Study,” HuffPost Healthy Living, Huffington Post, September 29, 2012.
10. Kahneman, D. and Krueger, A.B., “Developments in the Measurement of Subjective Well-Being,” Journal of Economic Perspectives, Volume 20, Number 1,2006, p. 3-24.
Source: US Census Bureau (2011)
Why commute?: A business case for boosting bottom lines and employee productivity
5. Partnership. Performance.5
Why commute?: A business case for boosting bottom lines and employee productivity
11. Boushey, H. and Glynn, S.J., “There Are Significant Business Costs to Replacing Employees,” Center for American Progress, November 16, 2012.
12. Jacquelyn Smith, “Why Your Top Talent is Leaving in 2014, and What It’ll Take to Retain Them,” Forbes / Leadership, Forbes, January 24, 2014.
13. Steve Crabtree, “Wellbeing Lower Among Workers With Long Commutes,” Gallup, August 13, 2010.
14. Christian, Thomas J., “Trade-offs between commuting time and health-related activities,” Journal of Urban Health, 89(5):746-57, June 12, 2012.
15. American Lung Association, “Most Polluted Cities.” State of the Air 2015, March 15, 2015.
documented that reduced commuting times can often
improve employees’ subjective impressions of quality
of life. Moreover, employees value the extra free time
associated with reduced commuting times. In our own
experience at Avison Young, we have found that some
professionals are willing to take a pay cut in the range of
15% to be able to live downtown and not have to drive
to work. They are willing to do so because of the related
improvements in quality of life and the opportunity to
eliminate transportation costs associated with the average
commute.
Retaining employees
Excessive employee turnover due to job dissatisfaction
can be expensive for employers – and one contributor
to job dissatisfaction is a long commute. The Center for
American Progress has shown that the average cost of
replacing a mid-range employee is 20% of the employee’s
annual salary.11
The center also found that high turnover
rates cause other employees to disengage and lose
productivity.
A 2014 CareerBuilder survey revealed that half of all
respondents who intended to stay at their current job
would stay because of a good work-life balance, while
43% reported that satisfaction with their pay was the
primary reason for staying. Factors that influenced positive
work-life balance perceptions include friendly co-workers,
a good boss, and – of course – a short commute.12
Keeping employees healthy
Poor health can lead to an overall decrease in quality of
life. Moreover, if an employee’s job is perceived to be
the cause of poor health, it could have a large negative
impact on productivity. There have been numerous
studies linking long commutes to negative health
outcomes.
One study found that one in three workers with a
90-minute daily commute had a recurring neck or back
problem.13
Another study found that workers with long
commutes cut out other health-related activities – like
sleeping, cooking homemade meals and going to the
gym – to make room for long commutes.14
The message
is clear: Commuting makes it more difficult to stay in good
health.
Improving local air quality
It is well known that personal vehicles emit far more
emissions per capita than the alternatives, such as a
combination of public transportation, cycling and walking.
Therefore, any plan that reduces the number of cars
on the road will result in better local air quality and an
associated reduction in breathing-related health problems
for both employees and the local community.
Passenger vehicles emit gases that are harmful to human
health. In extreme circumstances, the cocktail of emissions
can combine to produce smog, which is particularly
harmful to humans in the local environment. In fact, smog
is highly toxic to humans and can cause severe respiratory
illnesses, shortened lifespans for local inhabitants, and
even death.
The main contributors to poor air quality are particulate
matter, ground-level ozone, sulfur dioxide and nitrogen
oxide. These pollutants
can lead to the
development of asthma
and trigger more
frequent asthma attacks,
especially among
children. Ozone is
particularly troublesome
in cities with high
vehicle traffic levels,
including New York, Los
Angeles and Houston.15
Diesel vehicles emit
more harmful pollutants
than vehicles with
gasoline engines, but both are harmful to human health.
COST TO REPLACE A MID-RANGE EMPLOYEE
20%OF THE EMPLOYEE’S
ANNUAL SALARY11
1. Los Angeles
2. Visalia, CA
3. Bakersfield, CA
4. Fresno, CA
5. Sacramento
6. Houston
7. Dallas
8. Modesto, CA
9. Las Vegas
10. Phoenix
Source: American Lung Association
Top 10 Most Polluted Cities
6. Partnership. Performance.6
Why commute?: A business case for boosting bottom lines and employee productivity
Taking cars off the road: The top three solutions for corporations
As previously discussed, there are several benefits
associated with lowering the number of employees
commuting from home to work and back via personal
vehicles. Most tangibly, doing so gives corporations the
opportunity to rent smaller parking garages, leaving
more floor space for productive activities and improv-
ing the views on lower- and mid-level floors, as parking
garages may contain fewer floors.
Public transportation is often touted as the solution
to long commute times and their associated negative
health outcomes. But for many cities that have several
core business centers, public transportation is not the
complete answer for corporations because of the cost
of having to service multiple locations. And, the reality
is that cars are, by far, the most common mode of
transport. In fact, 81% of commuters in the United States
rely solely on their own personal vehicles to commute to
and from work; moreover, 86% of these personal vehicle
users drive alone.16
On the other hand, only 3% of
commuters in the U.S. rely completely on public transit,
and 7% use a combination of personal vehicles and
other modes of transport.17
Clearly, there remains a substantial opportunity to
reduce the number of cars on the road. There are several
ways for corporations to encourage employees to drive
less, but the three most effective opportunities are listed
below:
Investing in a commuter benefits
program,
Promoting enterprise mobile
workplace technology, and
Relocate to an office in a transit-
oriented development (TOD).
Solution 1: Carpooling benefit programs
Financial benefits
Corporations and employees alike can reap the rewards
from commuter benefit programs. For starters, the
U.S. government offers incentives to corporations
and employees that leverage alternate modes of
transportation. For example, companies are allowed to
deduct up to $130 per month ($1,560 per year) in wages
for each employee that participates in carpooling.18
But there are also direct cost savings for carpoolers.
Employees that drive together can save on fuel,
depreciation, wear and tear on personal vehicles and
insurance cost savings from reduced mileage.
Productivity-related benefits
Carpooling can also be viewed as a way to increase
productivity and morale. Many regions have carpool
lanes, which help commuters avoid traffic delays and,
therefore, decrease overall commuting times. Also, rather
81%: Solely Use
Personal Vehicle
16. U.S. Department of Transportation, Omnistats, Volume 3, Issue 4, October 2003.
17. United States Census Bureau, “Commuting in the United States: 2009,” American Community Survey Reports, September 1, 2011.
18. Department of the Treasury, Internal Revenue Service, “Employer’s Tax Guide to Fringe Benefits,” December 14, 2014, p. 23.
U.S. Commuters Mode of Transportation
7%: Combination:
Personal Vehicle
+ Public Transit
3%: Solely Public Transit
10%: Other
1
2
3
Source: US Census Bureau (2011)
7. Partnership. Performance.7
Why commute?: A business case for boosting bottom lines and employee productivity
19. Wallace Immen, “The Benefits of Telecommuting,” The Globe and Mail, January 15, 2013.
20. Fonner, K. and Roloff, M., “Teleworkers more satisfied than office-based employees,” National Communication Association, Journal of Applied Communication Research,
November 24, 2010.
than driving to work alone in a personal vehicle, car
poolers can spend their commute socializing, sleeping,
reading or even working. Hence, car pools can reduce
stress and contribute to a better quality of life and
improved employee productivity.
Solution 2: Promoting mobile workplace technology
Investing in the necessary technology and cloud-based
services to support a mobile work environment can
have a significant impact on office parking requirements,
depending of course on how many employees take
advantage of the opportunity.
Improved work-life balance
The option to work remotely is often perceived as an
important factor in maintaining a healthy work-life
balance. It has been demonstrated that employees
with more flexibility in terms of their work schedule are
ultimately happier with their job and more productive.
Improvements in productivity levels arise for various
reasons, including fewer distractions, better time
management, more time for work and lower stress.
Higher productivity
It may seem counterintuitive, but research has shown
that employees who have remote workplace flexibility
actually spend more time working than those who
work at the office (about 60% of the time saved by
not commuting is applied to productive work).19
Telecommuting also reduces employee downtime,
because employees do not have to take a full day off
from work when they are sick or attending to personal
business.
Stress relief
In addition to the removal of the stresses associated
with commuting, employees that work remotely avoid
other work-related stresses. A National Communication
Association study concluded the following:20
“Employees who telecommute the majority of the work
week are more satisfied with their jobs compared to
those working mostly in the office because working
remotely alleviates more stress than it creates.”
The researchers found that higher job satisfaction was
associated with the fact that employees who work
from home avoid many of the stressful and distracting
aspects of office work, such as office politics, meetings,
unwanted interruptions and information overload.
Telecommuting tools
There are many tools available to improve the efficacy
of telecommuting. For example, remote access,
mobile platforms and virtual private network (VPN)
technologies allow employees to access important
work documents from anywhere with an Internet
connection. There are also many cloud-based services
that improve the productivity of telecommuters and
keep them connected through Internet-enabled unified
communications. Many of these services are free, and
others are available for a monthly subscription, but
all are compatible with existing broadband Internet
connections.
Solution 3: Locate in a transit-oriented development
Relocating to a transit-oriented development (TOD) has
multiple benefits for employees, but most notably it
reduces employee driving significantly. TOD combines
office, residential and retail into a pedestrian-friendly
neighborhood designed around transit stations and
a central public space that enhance the public’s
experience. A TOD provides functionality for people
to live, work and play in the same place with less time
in the car. These types of projects have existed for
sometime in cities with dense populations; however,
mixed-use developments are springing up in other cities
around the U.S., particularly in the South. These types
of developments were once thought to only work in the
inner core of an urban area, although they are proving to
be very successful in suburban communities as well.
Benefits of a transit-oriented location
A TOD provides a higher quality of life for employees
offering the option to live near work or easily access
8. Partnership. Performance.8
Why commute?: A business case for boosting bottom lines and employee productivity
public transportation for those living further out. This type
of development promotes transit ridership, decreasing
the number of cars on the road, thereby reducing traffic
congestion, car accidents and injuries. The concentrated
population resulting from a TOD provides the opportunity
for developers to establish a diverse set of retail
businesses catering to employees.
This type of development around transit stations
uses urban design to make neighborhoods safer
and, usually, healthier. The successful application of
design elements can reduce neighborhood crime and
pedestrian-automobile collisions. Numerous studies
have demonstrated that TOD has a positive impact on
health. In such neighborhoods, people are more likely to
be physically active, a factor that can decrease rates of
obesity and heart disease.
Summary
The evidence presented in this white paper demonstrates
that companies need to recognize employee-commuting
patterns as an opportunity to reduce parking costs, ease
employee-commuting costs, improve employee quality
of life, boost employee productivity and reduce emissions
that negatively affect human health and the environment.
Corporations should explore the potential for cost savings
associated with a smaller and more efficient parking
garage.
As discussed, there are three key ways that corporations
can encourage employees to find alternate modes of
transportation to work instead of driving alone. The
first way involves providing benefits to employees that
choose to ride-share. A number of available ride-sharing
applications connect people who live and work in
proximity to one another. The second way is to embrace
telecommuting technology and make it available for all
applicable employees. This is easy to do with existing
broadband Internet infrastructure and new cloud-based
unified communications services. Finally, corporations
could relocate to office space within a mixed-use, transit-
oriented development that provides a central point to live,
work and play, decreasing the need to drive.
Maximizing parking garage efficiency and minimizing
parking-related rent expenses will require leadership
from corporate office users. If developers believe that
corporations have no interest in alternate employee
commuting options, they will not design parking garages
that appeal to corporate policies intended to reduce
commuting via personal vehicles. The verdict from
employees is clear: They do not like long commutes and
they are willing to make sacrifices in order to minimize
commuting time. Before making the next office leasing
decision, corporations should consider conducting an
employee drive-time analysis, an employee commuting
survey and a parking demand-analysis to determine the
most appropriate strategy for the organization as a whole.
