Office Fit Out Budgeting
Keeping your office fit out on budget is notoriously tricky. It’s a big investment, and there are hundreds of variables to consider, from air conditioning to upholstery. If you’re working to a set budget, it can feel really difficult to make sure your new office is delivered successfully. Even if you’ve got some flexibility on the budget, it’s important that you deliver the best possible value fit out for your company.
At Zentura, we receive enquiries every week from companies that are looking to do an office fit out but are unsure about their budget. Their main financial concerns are the return they can expect to see on their investment, and how to avoid rising costs during the project.
Mid-project price rises can be debilitating. At worst, they can mean you run out of budget completely and your contractor pulls off-site. You are left with a half-finished office, nowhere for your staff to work, and probably legal proceedings impending. At best, you have to pay more than you thought you would, and your relationship with your design & build partner is damaged. Both situations are seriously harmful to your business.
To avoid this, there are 5 key ways you can keep your office fit out on budget. It starts with setting the right foundations for your fit out – both in terms of brief and budget. Value engineering will help trim out anything you don’t need, while fixed-cost fit out and setting the right contingency will make sure you get your office fit out without going over budget. In this article, we’ll explain each of these 5 factors, and how you can apply them to your office fit out.
Define Your Brief
Without the right brief in the first place, it’s incredibly difficult to set the right budget, let alone keep your office fit-out on track. If your brief is wrong, your project will not be a success, no matter how cheaply it was delivered. Delivering a stunning new office that is perfectly on brand won’t matter if you didn’t fix what was wrong in the first place – whether that was lack of collaboration space, poor acoustics, or something else entirely.
Your first step is to define what exactly is wrong with your office at the moment. Are there far too many desks, but not enough collaboration spaces? Does the design feel tired and outdated, and just doesn’t reflect your company anymore? The problems aren’t always limited to what is immediately obvious. Rising absenteeism or worsening culture may all be signs that your workspace needs improvement.
Your team also need to need to be aligned on what the office should look like in the future. This isn’t about who gets executive offices and the colour of the walls. It's about what your office actually achieves for your company. This may be an office that enables hybrid working, a workspace that enhances your culture, or whatever you need your office to do for your company. Making sure your team are aligned on what is wrong with the office and what it should achieve for your company is essential to set the right expectations for your project, which in turn helps to set the right budget.
If you need help uncovering what is wrong with your office, and how it can be improved, take a look at our workspace consultancy service. Our process helps you understand your office and your people. We collect measurable and cultural insights into your office space and your people that enable you to make intelligent data-informed decisions, helping you to streamline costs whilst increasing employee engagement and wellbeing.
Set the Right Budget
In order to deliver your office fit out on budget, the budget has to be right in the first place. Trying to deliver without sufficient funds will mean you have to cut corners or miss parts of the brief. Overbudgeting will lead to an unnecessarily expensive and over-specified project, which is a waste of money. Both situations can leave your company worse off as a result.
So how do you decide on an appropriate budget for your office fit-out? It’s a good idea to start by estimating what it will cost to deliver your office fit out as per your brief. This will prevent you from picking an unrealistically high or low number. You can then compare this with what your company can realistically afford. It's also important that you consider the benefits that your office fit out will bring over the long term.
When it comes to estimating what your office fit out will cost, There are 5 key factors: size, specification, services, state, and setting.
Size is the one factor that will have the most impact on the cost of your office fit out project. Contractors will calculate their quote based on the quantity of materials the design calls for, and then factor labour into the cost. You will need to look at your company’s growth plans when calculating your space requirements. You don’t want to have to move in 2 or 3 years because you’ve run out of space.
The specification is almost as important as size when it comes to your office fit out costs. A high-specification workspace can cost more than twice as much per sq./ft as a basic design. While basic office fit outs are functional and adequate, their design tends to lack inspiration. Without a stimulating environment, the engagement and performance levels of staff will drop. Ultimately, there is no ‘right’ specification- it's what is best for you and your staff.
Another element that can increase the cost of your project is the condition of the building. Older buildings with solid walls and floors are much more complex to alter, and the cost increases as a result. More modern buildings with features such as raised access flooring and easy access are much simpler to work in. In this situation, the costs will decrease.
Much like the structural state of your new workspace, the condition of the services can add unexpected costs to your office fit out quote. If the utilities are in poor condition, they may require extensive remedial work before you can begin the project.
The final element that will have an impact on the cost of your office is the location. Local labour costs and demand can increase the cost of your office fit out. In urban areas, especially London, labour costs are much higher than in some other parts of the country. In areas such as central London, the delivery of materials is difficult, and this causes further cost increases.
For some companies, the cost of delivering the office fit-out on-brief is more than they can afford. Regardless, it is always good to make sure you are maximising your value for money. The best time to value-engineer your office fit out is once you have chosen your office fit out company, and they have given you a full estimate. They will be able to help your find cost savings to bring your office fit out within budget.
The first thing to do is review your brief, and see if all of it is necessary. All the heads of departments may want large private offices, but will it be worth it if they are only in the office 2 days a week? By considering separating the needs from the nice-to-haves, you will probably be able to bring your project within budget without damaging staff productivity.
Some elements in your workspace, such as lighting or ergonomic furniture should not be down-specified if at all possible. This is because cheaper options can cause your staff health and productivity issues. Other areas can provide cost savings that have little impact on the performance of your people. One common way to reduce the cost is to reduce the quantity of partitioning, as this requires costly electrical and plumbing adaptions.
Once you’ve agreed your brief and budget, sorted the design, and signed the contract, the last thing you need is to be hit with a long series of mid-project price increases. We’ve had companies come to us following terrible experiences with well-known design and build companies. As soon as the contract was signed, they were submitting price increases. They had created an amazing design, but only quoted for half of it in order to meet their budget. They were then charging the customer inflated prices for mid-project variations. Sometimes though, office fit out companies sometimes simply haven’t allowed enough contingency for the regular cost increases of raw materials.
At Zentura, we understand how unexpected cost increases can derail office fit outs for companies. We operate a fixed cost policy, which means you pay what you expect to, with no hidden extras. Missed or miscalculated costs should be our problem, not yours. Having trust in your office fit out company, and making sure you understand the project contract is essential so that you can avoid your project running way over budget.
Set a Contingency
Even if you’ve set the right budget for your brief and are working on a fixed-cost contract, you still need to add a contingency to your project budget. Fixed cost policies are designed to give you the assurance that you will get everything on the quote at the initial cost. It will not cover out-of-scope or unforeseen circumstances, such as structural issues with the building that weren’t visible before the start of the project. It will also not cover changes that you request during the project, like adding more data points. Office fit-outs are very complex projects, with thousands of details, and it's almost certain you will want to change something at some point!
Most projects will require a 5-10% contingency. If you have set a good brief and budget in the first place, you should be able to set a contingency at the lower end of this scale. The longer and more complex the project is, the higher the contingency will need to be. Of course, your objective is to spend as little as possible of this contingency, but if you do need to change something after the contract has been signed, you can do so without having to run over budget.
So now you know the 5 crucial steps to keep your office fit out on budget. by clearly defining the purpose of your office fit out, you can make sure your team are aligned and your expectations are realistic. By setting the right budget at first, you avoid having to cut corners or waste cash. Value engineering will enable you to get the most return out of your budget. Working on a fixed-cost contract will minimise mid-project price rises, and put you in control of any changes you want to make. And setting a contingency will give you the freedom to make small adjustments without going over budget. By following these 5 steps, you are in a much better position to make your project successful.
At Zentura, we’ve had experience on hundreds of office fit out projects over the last 3 decades. For many of these, we've helped clients to define their brief and budget, as well as value engineer their projects. With our fixed cost policy and contingency support, they have the peace of mind that we can deliver their fit out on time, on scope, and on budget.
To learn more about the costs of an office fit out, download our office fit out costs guide. There, we’ll explain the factors that affect the cost of your office fit out, why some companies are more expensive than others, and what you can expect to pay for your office fit out.