Office Fit Out Costs
Office fit outs are big investments. Despite the large upfront fee, the costs often increase even further. 69% of construction projects exceed their original budget. Of those, less than 1 in 3 exceeded their original budget by less than 10%. The construction industry is notorious for cost overruns, and the office fit out & refurbishment sector is no different.
Hidden costs in office fit outs can be debilitating. You have to pay more than your original budget, reducing the funds needed to run and grow your business. At worst, you can end up in an expensive and protracted legal battle with your contractors, turning your dream office project into a nightmare.
At Zentura, we’ve been carrying out office fit outs since 2009. In that time, we’ve worked on thousands of projects in London and across the UK. This has given us a lot of experience in identifying and reducing the hidden costs our clients face. In this article, we’ll go through the 6 top hidden costs that companies needing an office fit out often forget about or underestimate. We’ll also explain how you can avoid or minimise these costs.
One hidden cost that almost every company underestimates is the amount of time required to plan for and deliver your office fit out. Exactly how much time your team will need to allow will vary based on the size and complexity of your project. It will also be affected by your contract model – whether you use individual contractors or a design and build firm. A design & build firm like Zentura will do the vast majority of planning and preparation, but your input will be needed to make major decisions and give feedback on the design. Your management team will also want to be involved in major decisions and kept updated.
At Zentura we advise our clients to allow 5-10 hours per week for a 5,000 sq/ft project. For larger projects over 10,000 sq/ft, you will need to allow at least 15 hours per week. For particularly busy phases such as pre-start and delivery, this may increase by up to 50%. Given that office relocations can take as long as 18 months, this is a huge time commitment. All this time comes at a cost, and it needs to be budgeted for.
You can reduce the amount of time you and your team need to spend on your office fit out by appointing a design and build partner that you fully trust. You are looking for a company that understand your vision and project objectives and are committed to your success as much as theirs. They will take a lot less time to manage, as you won't need to monitor them closely.
2) Withheld Costs
Withheld costs are one of the most damaging hidden costs in office fit out. They often occur in competitive design and build projects, and are a serious issue in tender projects. If there is severe cost pressure, companies will reduce their profit margin to win the project. Once the project is won, they will then attempt to improve their profitability by charging for extras.
Some office fit out companies will even completely remove certain items from their quotes, such as graphics or biophilia. They will keep them in the design pack, so that most people don't notice. Once the project is in progress, they will charge extra for a lot of items that you thought were included in the original quote. This can be seriously frustrating as well as very expensive to deal with.
To avoid cost overruns on your office fit out project, we recommend you work on a fixed-cost contract with your contractor. Depending on the length of the contract, it may advisable to allow some provision for material cost increases. Your contractor shouldn’t be able to introduce extra labour costs for items already included in the scope. You should also cross reference the design package, and make sure everything there is included in your quote. Your contract also needs to include references to the design package to make sure it is part of the contract.
Variations are the single biggest reason for office fit out and refurbishment cost overruns. These occur when clients want to add or adapt something after the contract is signed. Your design & build partner will usually be happy to issue a variation to the contract at an appropriate cost. This is normally due to the client having omitted something from the original scope (e.g. a printing area), or wanting the specification of finishes (e.g. signage) to be improved.
Variations have occurred in almost all of the thousands of projects we have worked on. Office fit outs are complex projects. It is almost certain you will have forgotten something fairly minor or will want to upgrade something during the project. To prevent this from being a hidden cost, we recommend allowing a contingency of 5-10% of your project value. This will enable you to make changes as needed without going over budget. To reduce the number of changes needed, carefully review your quote and design package to make sure it includes everything from your brief.
4) Building Issues
The other reason variations are required is remedial works for the building. These are often completely undetectable before the project begins. Older buildings and utility systems are more likely to require remedial works. High-wear or capacity issues with the existing HVAC, power, and data systems are by far the most common reason remedial works are required.
Especially for systems such as HVAC, moving components like fan units will wear a lot faster than static components such as ductwork. If you are planning to increase the quantity of staff in the space, the utilities may not have sufficient capacity to cope and will need to be upgraded.
To limit the impact of this issue, we recommend you commission a detailed building survey before you commit to the project. Your surveyor will be able to produce a report detailing the condition of the building. This will list any visible or potential issues with the building structure and its systems. You can also reduce these costs by making sure your landlord pays for all the remedial works they are liable for.
5) Operating Costs
While not strictly a cost you will incur during your project, it is well worth examining the operating costs of your new office once complete. If you are relocating office, this should be an important part of your space selection process. An office refurbishment can also affect your office's operating costs. The actual cost of running the office every day can come to a surprising total – around 25% of annual rent. It’s important that you look to minimise running costs when doing an office fit out.
Modern HVAC systems are up to 50% more efficient than systems from 10 or more years ago. This can create a 20% saving in your total office energy costs. Modern electrical appliances are also much more efficient than outdated options. They will generate a positive return on investment in just a few years.
When looking to reduce the cost of your office refurbishment, be mindful of the impact on operating costs. Cheaper items will often have higher running costs and will need to be replaced sooner. This doesn’t mean to say you can’t decrease the quality of the specification, but you do need to consider if it is worth the long-term cost.
The most overlooked hidden cost of office fit out is aftercare. While office fit out companies will provide support during the project, many disappear as soon as the project is finished. If you have any teething issues with your office, you are either on your own or you have to pay inflated prices to get the issue solved. This can become a serious problem that impacts the success of the project right at the end. It can make a successful project feel like a failure.
There are two key parts to aftercare. The first is resolving minor issues that arise in your office as a result of your project, such as a faulty chair or TV screen. The other part is churn works – small adjustments that need to be made to your workspace as your company evolves and grows over time. Common examples are adding more desks or individual offices to enable more staff. The first should always be sorted by your design and build company, normally free of charge. The second part of aftercare won’t be covered by your initial project quote, as it is difficult to predict how your needs might change in the years to come.
To minimise the impact of poor aftercare on your office fit out, you need to assess potential design & build partners based not only on what they say but what aftercare provisions are in the contract. If a contractor is forced to make an artificially low bid, then aftercare is often one of the first areas to go. References from previous clients can also be very helpful to understand how their aftercare package works in practise, and how good their churn works service is. It may be worth paying a higher price to ensure your office fit out company provides a good aftercare package.
Planning Your Office Fit Out
Awareness of the 6 major hidden costs of office fit out is crucial to avoid or minimise their impact on your project. Now you know where to look for hidden costs, you are in a much better position to select a contractor based on their total project cost, not just their upfront cost. Adequate budgeting and careful planning are also essential to make sure your office fit out is not delayed or derailed by hidden costs.
To learn more about how avoiding hidden costs, read our article How to keep your office fit out on budget. It details the 5 essential steps you need to take to avoid cost overruns, and how you can apply them to your own office fit out or refurbishment project.
While every office fit out is different, we’ve analysed a wide range of office fit outs to give you a guide as to what you may need in your workspace, and what you can expect to spend to get it. Our guide includes office fit out costs per sq/ft, what drives the cost of your office fit out up or down, and a full specification cost breakdown. Download your office fit out costs guide.