How to Estimate the Cost of an Office Buildout

How to Estimate the Cost of an Office Buildout

When preparing for your office build-out, estimating the cost is as important as planning. It could mean the difference between a good, yet ordinary, workspace, and a great, inspiring, and productive workspace. Your build-out needs to not only consider your employees, but also your clients and your brand image. Since construction costs are often intimidating, especially to new businesses, negotiating tenant improvement allowances means the main portion of the build-out will be the responsibility of your landlord, not your company.

A Turnkey Build-out

Negotiating a turnkey build-out in your lease may be an ideal for you, as the tenant. This type of build-out allows you to provide specifications for the space, and the landlord pays for and carries out your plan. Turnkey build-outs are all negotiable but typically include electrical, walls, lights, phones jacks, carpet, paint, all selected in your style as the tenant. The advantages of a turnkey build-out allow you to simply provide your plan for the space, while the landlord foots the bill and oversees the work. When complete, you and your team move in, and while that sounds great, there are also disadvantages to a turnkey build-out. The landlord may be incentivized to complete the work cheaply, choosing low quality products throughout the space along with a less qualified contractor. Turnkey build-outs are often better option for companies leasing smaller spaces with short terms leases.

A Tenant Improvement Build-out

With a tenant improvement build-out, you as the tenant is in control. You can choose architect, designer, contractor, and purchase all the high end finishes you can afford. The tenant improvement build-out budget is also a part of lease negotiations, which means as the tenant, you’ll need accurate budget projections before your lease is signed. Generally, tenant improvement allowances are better negotiated with larger spaces and longer leases, both of which give you as the tenant the most leverage during negotiation.

Calculating Cost Before Lease Negotiation

The difficulty in determining how much a build-out will cost is the fact that market prices are widely variable. Not only does general location within an area make a difference, but also the larger prospect of where you are in the country. Some markets are hotter than others, creating a big cost differential. As a general rule, new buildings are more expensive than older buildings because items like doors, ceilings, and other finishes can be reused during the build-out process. If you choose high-end finishes or need a specialty (tech, medical, or lab) build-out, costs will increase. Union labor is also considerably more costly during a build-out.

While a build-out with standard finishes in a new building in Texas might run you around $50 per square foot including paint, carpet, ceiling, lighting, plus coffee bar and copy room, the same space with high end finishes would be closer to $75 to $100 per square foot. The same standard finishes in an older building with salvageable doors, hardware, and finishes would only likely run near $35 per square foot with high end finishes averaging between $45 and $60 per square foot.

Comparatively, similar properties in Manhattan or Beverly Hills would probably cost you $65 per square foot for a simple build-out with standard finishes, rising to nearly $100 per square foot if union labor performed the work.  Across the country, build-outs with premium finishes in sought after locations were significantly higher than standard finishes in up and coming areas. Though broad, these cost figures can still be beneficial as businesses negotiate leases.

When the time comes for build-out negotiations, Perillo Construction can help you with cost estimates, planning, and successful completion of your office build-out.