Here’s What JLL Says About Building Out Office Space

August 30, 2019 | Workplace

Every industry has its lingo.

And the Commercial Real Estate (CRE) industry is no exception.

Many CRE buildings begin with tenant spaces comprised of a little more than four walls and a door. The concept is that the spaces should be easily customizable and eventually polished to meet the particular requirements of each tenant.

The method of finishing this rough space is referred to as the “build-out.” There can be lengthy negotiations between the landlord (or building owner) and the tenant over the following issues:

  • What improvements are needed
  • Which party is responsible for paying for the improvements
  • Which party is responsible for managing the work
  • What if anything will the tenant be allowed to remove once the lease is over

Tenants are confronted with complex decisions settling on an office space that suits their needs the best. To provide meaning for your build-out, this guide covers a generalized expense model outlining the various styles and levels of quality. It also provides an examination of trends in occupant improvement allowances and an analysis of how occupants plan and use their spaces.

The Budget for an Average Office Fit-Out in 2019

In 2018, the average cost of an office build-out rose 12 percent. This increase was stoked by a mixture of steady demand for new space and increased prices for materials and labor. Tenant renovation allowances also rose during that period but were not sufficient to completely offset cost growth, leading to an increase of net out-of-pocket costs to occupants.

JLL foresees costs continue to rise throughout 2019 and on into 2020, though at a more modest velocity than over the past year or so. A shortage of qualified construction workers will be among the most notable impediments for finishing projects on schedule and on budget. Material expenses have remained relatively low in 2019, with figures expected to remain as such until 2020.

With operational costs continuing to rise, it is more critical than ever for occupants to be informed and to center on designing the most efficient and adaptable space possible. Efficiency does not merely involve density, though it is one important aspect; efficiency also involves choosing the right office style and finish level so that space can maintain an organization long into its future.

Below is a budget assessment for basic, medium, and high-quality build-outs. The definition of each style is as follows:

  • Basic: Low budget with a focus on functionality, essential technology, and aesthetic.
  • Medium: Elevated design complexity, including upgraded lighting and other design enhancements with the use of common materials.
  • High: First-rate finishes and renovations. More time and money spent on aesthetics and detail.

Progressive (open floor plan)

Highly collaborative office space with 100 percent bench seating with no enclosed offices. According to a JLL report, a progressive design “also includes numerous varieties of both collaboration and conference spaces.” This design is perfect for tech companies, startups, and progressive corporate offices. It offers a 13 percent savings over traditional and a 6 percent savings over moderate.

  • Base: $147 p.s.f.
  • Medium: $170 p.s.f.
  • High: $193 p.s.f.

Moderate (agile floor plan)

A partially collaborative office space with 10 percent enclosed offices with small workspaces and benches for visitors. A mix of conference and collaborative spaces as well. This design is perfect for standard office users and corporate offices transitioning to efficient office models. It offers a 7.2 percent savings over traditional designs.

  • Base: $156 p.s.f.
  • Medium: $182 p.s.f.
  • High: $207 p.s.f.

Traditional (enclosed office spaces)

Thirty percent enclosed offices with generous workspaces and no benches. One collaborative space and a few conference rooms. This design best fits law firms, traditional financial companies, and other privacy-focused office spaces. This is the most expensive model with little to no savings.

  • Base: $167 p.s.f.
  • Medium: $196 p.s.f.
  • High: $224 p.s.f.

With all of that said, the cost of a progressive build-out average between $147 to $167 per rentable square foot (RSF). For a moderate build-out, the average cost ranges between $170 to $196, with traditional build-outs starting at around $193 to $224. Of course, these prices do fluctuate depending on the price of materials at the time of purchase, as well as labor costs.

What is “Future-Proofing”?

Future-proofing is the process of anticipating the future and developing methods of minimizing the effects of shocks and stresses of future events. In relation to real estate, this means developing buildings that will not become obsolete or too costly to renovate when new needs and technology come into play.

For many savvy business leaders, future-proofing their organization is critical for the long haul. By envisioning how the future may affect their operations, leaders are capable of developing ways of reducing the effects of future events, whether positive or negative in nature. This means designing and implementing build-outs with the future cost and schedule impacts in mind.

Such innovative future-proof build-outs have been accomplished by mega-brands such as Google and Netflix.

The Gridd system is the future of flooring, in the sense that the design itself is made to not tie building owners or tenants into a fixed flooring setup. The ability to adapt, reconfigure, rewire and change floor plans is easily achievable because the Gridd low profile raised floor system does not affix to the building or require tools to install. Not only that, with the use of the native app and augmented reality, electricians can easily see how the building is wired right through their phone. Incorporating this type of raised floor early in your design, saves your company or institution a lot of time and money by avoiding future renovation needs. While pondering the cost of a specific style of build-out, it is critical to keep the idea of future cost prevention at the forefront of your mind.

If you would like to know more about FreeAxez and how our low profile access floor systems and modular power systems accommodate changing technology and adapt to future changes quickly, contact us today! We would love to share our solutions with you.

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