JLL’s Todd Burns shares some office renovation tips to avoid the financial guesswork.
Reinventing a workplace means balancing the art of what’s possible, with the science of what’s practical. As the war for talent rages on, firms must provide more human-friendly work environments—while also confronting ever-increasing construction costs. Fortunately, workplace leaders can harness cost data to stay ahead on both fronts.
In 2018, the average cost of an office fit out grew by 12 percent. Rising prices for labor and materials are partly responsible for the upturn—but strong demand for new space also played a key role.
That’s because, despite cost constraints, many leading companies now see the workplace as a vital player in organizational success. They’ve seen that cookie-cutter style no longer cuts it in today’s evolving world of work.
Now, the right office layout, style and finish selections can spark productivity, attract and engage star talent, and delight clients, ultimately supporting long-term organizational success. And a well-informed fit-out strategy can deliver on all those goals, while supporting space utilization and efficiency.
Understanding current, real-world cost data can help you and your colleagues make educated decisions amidst rising costs and increasing C-suite expectation from the workplace. For example, making the most of greater tenant improvement allowances can go a fair distance in offsetting high construction costs.
To bring the power of data to your renovation strategy, it helps to start with a good look at your own workforce priorities.
Know your workplace style
Every organizational culture and brand is unique, and therefore will have its own expression of workplace style. Will your firm’s teams be best supported by an open, flexible layout with state-of-the-art collaboration technology, or are they more likely to thrive in a traditional office setting? Or, are they more likely to appreciate a mix of spaces, which they can move freely between as needed based on the task at hand?
Establishing early on a clear sense of optimal workplace style, from layout and density questions to the level of finishing touches, can have a huge impact not only on a potential project’s average spend. It can also affect its ability to achieve approval and funding, and ultimately, success.
So, to help you go beyond the guesswork games long associated with renovation jobs, we identified trends in workplace fit outs within our database of more than 3,600 projects across 59 markets, 17 industries and 100 clients to benchmark three predominant and distinct workplace styles.
Following are three primary workplace styles to consider, along with the associated average costs of each:
1) Progressive-style offices.
Created and nurtured by the tech industry, the entirely open floor plan scheme has since been adopted by other industries looking to attract tech talent. Heavily favoring collaborative, multi-use spaces and common areas, this style can pay off in terms of collaboration as well as efficiency of space and equipment use.
Average spend: On average, this style rings in at $170 a square foot—the lowest of the three workplace styles we examined. Why the lower costs? Thanks to features like mobile benching, more all-hands-on-deck space, and ‘Un-rooms’ (three-sided standing conference rooms), you can achieve savings on materials like permanent walls and doors. End costs vary, however, based on how much technology spend is needed to enable technology in the collaborative areas.
For example, a tech firm might go above the average by investing in state-of-the-art video-conferencing platforms, while a progressive corporate office might go below with some more basic collaboration and connectivity tools.
2) Moderate-style offices.
These are currently the most common office style in use across the U.S., with 52 percent of corporate occupiers reporting a moderate office space design. Moderate office styles will typically have flexible floor-plans for the majority of the space, around 90 percent on average, with enclosed offices comprising the remaining 10 percent of remaining square footage.
This approach can work well for corporate offices looking to transition to more efficient and collaborative models, but where leaders still expect and appreciate the blend of collaboration and privacy benefits that come with this balance of open and private office space.
Average spend: On average, this style rings in at $182 per square foot. Hard costs budgets tend to be relatively middle-of-the-road due to a strong proportion of dividing walls versus enclosed private offices, which require more material than open spaces to build and furnish. But, tech expenses may be somewhat higher than in a less dense setting.
3) Traditional-style offices.
Currently, 21 percent of offices fall squarely in the traditional style, with nearly one-third of the floor space dedicated to private offices. The remaining area is open, often with relatively large workspaces and high partitions. This approach tends to have the lowest employee density of these three styles, and also usually has the highest cost-per-square-foot of hard costs. In addition to supporting employee privacy, this approach may work well in law firms or established financial companies, where confidentiality issues are a matter of compliance. On the flip side, the relative dearth of collaborative space can mean missed opportunities for engagement and efficiency.
Average spend: $196 per-square-foot, with heightened materials costs for walls, doors, and furnishings. Some of this heightened cost, however, can be offset by a diminished need for collaboration-oriented technology.
It’s important to note in all of the above styles that the average costs are indeed average. Scaling up or down the complexity of design, finishes, improvements, and upgrades can make what may seem like a small decision—like fixtures, lighting, or quality of materials used—add or subtract thousands of dollars. In a progressive style office, for instance, highly complex features can be an average of $66.10 more per-square-foot than the average.
Goodbye guesswork, hello, informed renovation roadmaps
Assessing corporate style in line with budget is a key beginning. But other cost data can prove invaluable, too. Tenant allowances, for instance, can make or break a potential reno project. This is no small prospect, considering tenant improvement allowances have jumped by double digits, growing more than 10 percent in 2017 and 13 percent last year—and concessions are expected to be even greater through 2019.
It’s also wise to consider current cost trends alongside future goals. Unlike years gone by, when leasing a space for 7-10 years and leaving it unchanged during that time was the norm, are over. Now, it’s becoming more common to retool a workplace every other year or so, making agility and flexibility features more of a long-term investment than ever.
Ultimately, it’s another case of knowledge is power. With real-world cost data, workplace leaders can tie their best workplace concepts back to reality, and win.