Building out office space is always a challenging project that requires time, investments, and careful planning. Some tenants mistakenly assume that buildout cost calculations need to be done after the rental agreement is signed. In reality, if you create a preliminary budget while negotiating rent terms, you could save a substantial amount of money.
Building out office space usually occurs before the tenant occupies it. Landlords may offer improvement allowances, which can cut the costs. Additionally, they could pay for partial buildouts or do a generic buildout on their own.
If you understand buildout costs, it can help you adjust the rental terms with the landlord and build your budget accordingly. Figuring out tenant improvement allowances gives you a clear picture of your future expenses. You could also use this information to negotiate with other property owners when choosing the best office space for your needs.
To plan an office space buildout properly, you need to understand what affects the costs.
1. The Initial Condition of the Office Space
The biggest factor that affects the buildout costs is the initial condition of the office space. For example, if another tenant before you already occupied the space, the majority of work has already been done. You may need to do a couple of adjustments to make the space suitable for your particular needs. But overall, the costs will be low.
In case office space just appeared on the rental market, none of the buildout work has been done in advance. You would need to work on a capital office improvement project rather than making several minor renovations. The cost of such a project can be more than twice as high.
2. The Size of the Office Space
When you plan your buildout budget, you will be considering the renovation price “per square foot.” Accordingly, the larger the area you have to work on, the higher the total price is likely to be.
However, larger projects also come with a few benefits. For them, you usually have to buy materials in bulk, thus lowering the overall costs. According to tenant build-outs experts from AFS General, contractors may also charge less per square foot for large projects than they would for minor renovations.
3. The Quality of Materials
Do you want top-quality wooden floors or does linoleum work for you? Depending on your industry, you may need to invest in high-quality materials.
For example, companies that need to make an impression on clients (law firms, banks) invest in expensive finishes. Meanwhile, companies that need an office for their employees only could go for less expensive materials.
Opting for cheaper finishes could cut your buildout expenses tremendously.
4. The Office Layout
Office layouts can be different. From large open space to numerous little rooms, the prices can fluctuate substantially. Do you want a break room and three bathrooms? Do you plan to create numerous meeting rooms and several cubicles? Is a single open space sufficient?
Extra walls, doors, plumbing, and wiring come with a certain price tag. So the more complicated your office layout is, the more money you should expect to pay for the buildout.
Do you have sufficient time to plan the layout, search for contractors with the best offer, and wait for good deals on materials? Then you can take a big chunk off the final bill. If you are in a big hurry to move it, be ready for larger expenses.
The earlier you start planning the buildout, the more you can save.
How Much Does it Cost to Build out Office Space?
When you consider all the factors, the average cost of office space buildout is about $200 per square foot. The price may vary on your location. If construction labor and office renovations are in high demand (like in New York or San Francisco), the costs could go up to $250 per square foot. In other cities, it can be as low as $50 per square foot.
Overall, office space buildout isn’t extremely expensive. If you can find the perfect rental space in your area, don’t hesitate to negotiate buildouts with the landlord. Just make sure to shop around.