For most companies, rental and operating costs play vital roles in deciding whether to relocate to a new office space. However, one of the most important factors to take into consideration is the interior fit-out cost of the office space. This can be a very daunting experience given that what may seem initially to be a very simple and straightforward interior fit-out project, could potentially grow in complexity and cost, as unforeseen complications emerge.
Due to budget constraint, it is not uncommon to find clients overly optimistic about the fit-out budget by under-estimating the project cost at the initial stage. This eventually forces the client to come up with additional cash for the shortfall or compromise on key project elements. Most of these headaches can be avoided with better and more complete information presented early in the project and with the support of a project manager.
In principle, there are five major factors which drive fit-out costs:
- condition of the base building
- types of space and facilities required
- when the space is required for occupation
- what the client is prepared to spend
- the client’s corporate objectives.
However, getting an idea of how much you can expect to pay for the fit-out of the office space can be difficult because projects vary greatly. Some office fit-outs will be purely cosmetic while others might involve extensive fit-out works with a detailed analysis of the utilisation of the workspace environment for future company growth.
To establish a ball park budget at the preliminary phase, the client must decide whether a low, medium or high specification fit-out is ideal for the office environment, based on branding and corporate objectives. A low specification fit-out will usually place emphasis on getting the most out of an existing space rather than engaging in an extensive fit-out-this is usually in the region of 300-600USD per square metre. The medium specification office fit-out takes this a little bit further by improving on the product specifications with greater emphasis on client facing areas and fit-out works. This is usually in the region of 600-900USD per square metre. The high specification, on the other hand, will have experienced interior designers and construction experts on board with high product specifications and additional facilities such as a canteen, gym, crèche, video conferencing facilities, and so on. This usually starts from 900USD per square metre, depending on the local currency fluctuations, given that most construction materials are imported into Nigeria.
From a cost saving perspective, the first step in getting good value is by engaging the right project manager (PM) to drive the entire process from initial conception to final completion. An experienced project manager will be able to interpret the client’s brief, and can drive the design and construction process to a client’s vision and budget with seamless execution. Here are some of the ways that the PM can assist in helping the client get value for money:
Firstly, the PM will check the condition of the base building to establish that the key components are not obsolete, and as such can support the client’s work environment. In doing so, the PM will be able to advise the client if a Category A (CAT A) or Category B (CAT B) fit out is required. Typically, CAT A is what the developer provides as part of the rentable office space. In other words, raised floors, suspended ceilings, extension of the mechanical and electrical services above the ceiling from the riser across the lettable space, finishes to the internal face of the external and core walls, and blinds. On the other hand, CAT B completes the fit-out to the occupier’s specific requirements. It can typically consist of installation of partition walls, enhanced finishes, conference/meeting room facilities, reception area, enhanced services/specialist lighting, IT and AV installations, kitchen fit-out, and furniture.
Most times, a tenant’s fit-out of lettable office space follows on quickly after practical completion of the base building. The PM will carry out a conditions survey once the client takes occupation of the floor and the landlord will be notified of any defects. Often, the appointed contractor will need to make good the defects and on behalf of the client, the PM will put forward a claim for the cost of the remediation works. Any expenditure by the tenant against this type of work is recorded and the landlord notified.
Secondly, the PM can assist in conducting a space assessment and a test-fit (furniture layout) of the space to be occupied. These not only help to determine how much space is required but also how employees could make better use of the space. This in itself is an opportunity to identify significant savings, as well as map out future requirements for factors such as growth and internal team changes. The test-fit can also provide the basis upon which contractors are invited to tender for the construction works or use to ascertain the budget prior to any financial commitments.
Another key component of interior fit-out costs is furniture items. Typically, these items make up about 40% of the total fit-out cost components. While the idea of having a design and build contractor to provide a one-stop solution may be tempting, it should be noted that contractors will usually add about 30% to the manufacturer’s price to allow for profit and associated risks. Therefore, the most cost effective approach will be to separate the furniture items procurement from the contractors work package. The PM can assist the client to conduct separate Request for Proposal (RFP) for the furniture package by targeting reputable furniture manufacturers thereby cutting out the middleman-in this case the contractor.
Finally, over the last few months, fluctuating foreign exchange rates have posed a significant challenge to the construction industry. Therefore, it is important for occupiers looking to embark on fit-out works to allow for contingencies due to fluctuating foreign exchange rates as this can impact on relative costs.