Office Fit Out Return on Investment
One of the first questions any company planning an office fit out wants to know is what their project will cost. An office fit out is a big investment, often costing hundreds of thousands or millions of pounds. However, there is more to an office fit out than the upfront cost. You also have to consider the benefits it will provide for your staff and company in the years to come, and what return on investment you can expect.
However, determining the ROI of your planned office fit out is difficult. There is no set formula or multiple calculation. And while the upfront cost may be very tangible, many of the benefits, such as improved wellbeing, can seem a lot more abstract.
Before making your decision on whether to proceed with your office fit out or not, you will need a good understanding of the different benefits your project will provide. You can then compare the benefits to the cost and risks to see if your project will be worthwhile.
While we can’t create an online calculator that will give you an exact ROI of your project (sorry!), we can explain the most important benefits an office fit out provides, and how these will affect the ROI of your office fit out. Here, we'll walk you through 5 of the most important benefits of office fit out, and how you can use them to maximise the ROI of your project.
Most services companies spend 10-15% of their annual revenue on real estate. Obviously, the return on an expense this large needs to be maximised. However, the average organization has 30-50% more real estate than it needs. This means you could be wasting more than 5% of your annual revenue on office space you don’t need!
Given the recent boom in hybrid working, most companies have a lot of desks sitting unused. Meanwhile, their collaboration spaces are often crowded. Depending on your current design, you may be able to make a space-saving of around 20-40% by moving to a hybrid working model. This means you could relocate to a new, smaller space and save costs. Alternatively, you could create a sublet space within your existing office, generating extra income.
In recent months, we’ve worked with Casio and Pcubed to reduce their office space requirements by 33% and 25% respectively. Casio chose to relocate, while Pcubed created a 2,500 sq/ft sublet space within their existing building.
With recent rises in energy costs, the costs of running the office every day is higher than ever. In many cases, operational costs are now around 25% of annual rent. An office fit out is an opportunity to reassess all these costs and how to reduce them going forward.
For example, air conditioning often accounts for around 40% of a company’s total energy usage. 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, further reducing your office running costs.
Recruitment & Retention
Recruiting and retaining high performing staff is absolutely essential to the success of your business. A recent study found that high performers are 400% more productive than average ones. However, staff turnover has risen sharply in recent years. Replacing staff is expensive. It costs around 30% of the annual salary for a junior employee and up to 400% of the annual salary for executives. This means you could be spending 15% of your staff expenses on recruitment! A great office design will help you save a lot of these costs by improving your staff turnover.
Your office relocation can also improve your talent attraction. By ensuring your workspace is well located near to good talent or in a prestigious location, you are giving your company access to the best possible talent. Office fit-out can also improve your recruitment by creating a great first impression. An eye-catching, on-brand reception and interviewing area will help convince interviewees that they want to work at your company.
Both existing and potential staff are placing increased emphasis on their personal wellbeing since the pandemic started. Their office environment is a crucial part of this. 87% of workers would like their current employees to offer healthier workspace benefits. Common requests are wellness rooms, sit-stand desks, and ergonomic seating. An office design that improves staff wellbeing will be an excellent investment.
One of the most frustrating challenges many managers have to deal with is illness-related staff absences. Workers in the UK lose an average of 30.4 working days a year due to sickness or illness-related underperformance, costing the economy £78bn. Modern offices maximising biophilic design have reported a 30% decrease in sickness-related absences. They also reported an increase in cognition and sleep quality.
A high-quality office fit out can have a noticeable impact on the wellbeing of your people. As Tim Gould, the Deputy Managing Director at Casio UK said, “the key benefit has been our staff have been happier. Happier people are more productive people”.
Improved productivity is a crucial benefit of your office fit out. Without motivated staff consistently producing great work, your company cannot achieve its potential. Productive staff are crucial to building a successful and profitable company. Despite the importance of staff productivity, improving it remains a problem. Most companies have seen a 3-6% productivity drop since 2020. As there place where your staff spend most or all of their working lives, your office has a profound impact on their performance.
Most office staff spend more than 2,000 hours a year working, so even a small increase in productivity can have a significant impact on the bottom line. The productivity benefits of a new office, however, can be far from small. Research shows that a well-designed office can increase productivity by up to 20%.
Maximising the ROI of Your Office Fit Out
Unfortunately, we can’t give you a definitive ROI on your office fit out, because there are so many variables. Each business's situation is completely different. The ROI of your project will depend a lot on the quality of your current office design, as that is the baseline by which all gains will be judged.
By reducing two of your greatest costs at the same time as having a huge impact on the performance of your people, an office fit out can have a huge impact on your company and deliver an amazing ROI.
If you want to learn more about how much your office fit out could cost, check out our downloadable office fit out costs guide for more information. If you’re ready to talk with us about how you can improve your workspace and the impact this will have on your business, we’d love to hear from you. Book a call with one of our workspace experts here.