Office Fit Out Costs
If you’re planning an office fit out, one of your first steps will be to research what your project will cost. You may even have asked a design & build company to provide an initial quote. At this stage, you’re probably thinking why is office fit out so expensive? You’re not alone. Many companies we speak to are surprised at how much their project will cost. They struggle to see how their project could possibly cost £100,000, or £1,000,000, or whatever the cost is.
The fact is, there is a lot more that goes into an office construction project than meets the eye. An office fit out requires a lot of expensive raw materials, most of which are not visible once the project is finished. Delivering an office fit out successfully also requires a lot of time and effort from highly skilled professionals.
Every year, we speak to hundreds of companies planning an office fit out. For many of these, we’ve helped them to define their project brief, as well as quoting and value engineering their project. In this article, we’ll take a closer look at the main factors that make an office fit out so expensive. We’ll also cover 7 ways you can reduce the cost of your office fit out.
Office Fit Out Cost Drivers
Office fit outs require a lot of raw materials, most of which are not seen once the project is complete. As well as the visible elements such as signage and furniture, there are a lot of other parts, such as sub-flooring and insulation. Typically, about 40% of your project costs will go toward materials.
Many of these raw materials are construction staples, such as wood and steel. Not only are they expensive to extract from their raw state, but they also require a lot of processing to reach their finished state. These materials have also suffered huge prices in recent years. COVID-19 has reduced supply and increased demand. Over the last three years, raw material costs have risen 15-20% per year on average, while steel has more than trebled. As a result, construction costs have increased in recent years.
Another factor causing office fit out cost increases is rising energy costs. As a result of the extensive processing that raw materials require, office fit out prices are vulnerable to increases in energy costs. Energy prices in the UK have increased by up to 400% in the last 12 months. This has caused overall project costs to rise by 2-4%. In some cases, energy costs have risen so much that steel mills have had to reduce production, further lowering supply.
From April this year, manufacturing plants will no longer be able to use tax-efficient red diesel, further increasing their energy costs. Raw materials also require a lot of energy for transportation and installation. This further increases overall project costs.
The intensive labour required to produce raw materials also contributes to high overall project costs. Many base materials, such as steel and plasterboard, require a lot of skilled man-hours during production. Labour costs also have a direct impact on your project. A 5,000 sq/ft office fit out would take 3-5 weeks. That adds up to 4,000 man-hours on site!
Many elements of office fit out are either dangerous or technical. Both these situations need extensive qualification and training by specialised workers, which further increases costs. Overall, labour costs will contribute 30-40% of your overall project costs, and are a big part of what makes office fit out so expensive.
The mechanical, electrical, and life systems are some of the most important (and expensive) elements of an office fit out. Mechanical and Electrical includes Air Conditioning (HVAC), Power & Data, and Lighting. Life Systems are all the systems and features in your office design to protect and evacuate you and your people in the event of an emergency. This includes sprinklers, emergency lighting, and standby power.
Because these systems are almost invisible, many people underestimate their importance to keeping your office running, and the amount of work that goes into installing and maintaining them. They are complex systems that require expensive components and skilled maintenance. Typically, utilities will comprise around a third of your overall office fit out costs, including materials and labour.
No two offices, buildings, or briefs are the same. As a result, each project is completely bespoke, both in terms of design and build. A lot of work is required in understanding your company's needs, and how your office can help your business forward. The design is then created around your brief and brand, rather than a one-size-fits-none approach. The delivery is also bespoke. This level of customisation means economies of scale are not as relevant. Each project requires a lot of planning and preparation.
The final element that makes office fit out so expensive is the uncertainty. Depending on the size of your project, it could be a year or more before it is finished. The construction industry is volatile to price increases and supply issues, as it is so competitive and interdependent. As a result, office fit out companies have to build in contingencies so that they can continue to deliver your project in the event of supply chain issues.
How to Reduce Your Office Fit Out Costs
Office fit outs may often be expensive, but that doesn’t mean you are powerless to reduce the costs. With careful planning and good management, there are several steps you can take to keep the cost of your office fit out down. However, it’s also important that you minimise the impact of these cost reductions on the overall finished project. Here, we’ll explain several steps you can take to reduce the cost of your project with minimal impact on the end result.
Effective project management is essential to making your project a success. As we’ve already explained, office fit outs can be very uncertain and complex. This means a skilled and experienced project manager is necessary to minimise the impact of disruptions.
While it may seem like a good idea to appoint specialist contractors, the increased outlay of working with a design and build firm will almost always prove to be a good investment. With their contacts, expertise, and experience, they will be able to save you cost as well as time, ensuring your project is delivered on time, on brief, and on budget.
Minimise Build Out
The one thing you can do that will have a big reduction on the cost of your office fit out is to reduce the quantity of walls built. Building partitioning is labour and material intensive, so it's very costly. The amount of supporting work required further increases partitioning costs. Often, services such as lighting, fire detection and floorboxes have to be reconfigured to suit the new layout.
The best way to reduce the amount of partitioning needed in your office furniture is to use zoning furniture and office pods. Companies often think they need to build out meeting rooms, but this isn't always the case. Office pods can normally do the job just as well, and often cheaper. There are a wide variety of pods available, from stand-up call booths to 16-person meeting pods. These come in a range of designs and price points, so there is bound to be something that meets your requirements.
Maximise Tax Relief
Tax relief can save you up to 25% of your office fit out costs. However, few companies fully understand how to maximise the available tax relief schemes. The first thing to establish is what works are classed as repairs and what works are classed as improvements. All repair works can be classed as an expense, making them automatically tax deductible.
The Annual Investment Allowance (AIA) is a form of tax relief designated for the purchase of business equipment. You can deduct the full value of an item that qualifies for AIA from your profits before tax. This is claimable on eligible on assets up to £1,000,000. The categories most relevant for office refurbishment are “Office equipment” (including office furniture), and “certain fixtures” (including air conditioning, fitted kitchens, and bathroom fittings). We’ve written a full article explaining both of these allowances and how you can reduce the cost of your office refurbishment through tax relief schemes.
You can save significant sums on your office refurbishment by identifying the nice-to-haves and then respecifying them. You could even eliminate them altogether, depending on how much you need to cut costs.
This is where it is essential to have a well-defined project brief right at the start. If you need to reduce the cost of your office refurbishment, it's important you don’t eliminate essential parts of your office. Doing this could decrease the performance of your people. When you need to value engineer, you can compare your design with what you need the project to achieve. This will enable you to identify the nice-to-haves that aren’t necessary to meet project goals.
The next place to look for cost reductions is reducing the specification of the finishes. Some things like furniture or lighting should not be respecified. This is because cheaper options can reduce staff productivity and even cause health issues. However, there are some ways to create cost savings that have little impact on the performance of your people. You can often specify a much cheaper fabric for the furniture that will do the job nearly as well. Another way is to respecify the flooring. There are a lot of options available, and you will likely be able to find a similar style at a lower cost. As this is such a high-quantity item, even a small reduction in cost per sq/ft can generate significant savings.
While it may not save initial costs, a fixed cost contract is absolutely essential to reduce the overall cost of your project. The last thing you need is to be hit with a long series of mid-project price increases. Without a fixed cost contract, you are liable for raw material price increases, so a commitment to deliver the project for a fixed cost is essential.
Your fixed cost contract should also be tied to the design as well as the quote. Some design & build companies will omit certain parts of their design in the initial quote. They will then add them as an extra partway through the project, often at inflated costs. By ensuring that the entire design is included in the quote and that the contract is tied to both the quote and the design, you can keep your office fit out on budget.
Managing Your Office Fit Out Costs
Office fit outs can be very expensive projects. The material-intensive nature of construction projects, as well as the extensive processing that the raw materials require, mean materials can contribute up to 40% of your project costs. The hidden systems that make your office function further increase the costs. Office fit outs are also very labour-intensive projects, both in raw material production and final project delivery. The complexity and uncertainty of delivering a project in a volatile market also contribute to the high initial cost of office fit outs.
However, it's important to consider your fit out as an investment, not an expense. Real estate and staffing costs are two of the biggest outlays of every company. By maximising the performance of both, an office fit out can have a transformative impact on your company and deliver an amazing return on your investment. To learn more about the benefits you can expect to see as a result of your project, read our article what is the ROI of office fit out?
If you want to learn more about how much your office fit out could cost, check out our downloadable guide. 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.
Ready to talk about your office fit out project? we’d love to hear from you! At Zentura, we provide a concept to completion office fit out service, from initial consultancy through the design and project management stages. Our team are highly experienced in delivering fit out projects on time and on budget with minimal disruption to you or those around you. Book a call with one of our office fit out experts to get started!