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A Series: How Much Will it Cost to Renovate or Remodel my Office? A Deeper Dive into Construction

The last 18 months have been an unprecedented time. The Pandemic has wreaked havoc on global supply chains, caused wild swings in the cost of goods, and has introduced a host of new work environments and circumstances. For a period, we saw many employers embrace a work-from-home model in order to maintain some stability and keep active projects moving forward. Over the past 6 months, the return to work and the office setting has been steady and has caused many business owners to entertain thoughts of renovating or remodeling their offices. Whether it’s an attempt to foster better and healthier working conditions, create more individualized workspaces, attract and retain quality employees, or simply create a modern and up-to-date office environment, the question of cost is often the focus of these conversations. We will briefly explore how construction costs are determined and how understanding the various degrees of renovation can inform the decision-making process.

Defining the Scope of Work

The primary factor in determining the cost of any project is a clearly defined scope of work. Office renovations can vary from simple upgrades in fixtures, furnishings, and equipment (FF&E) to “full gut” renovations. The final scope of work typically falls somewhere in between. The first step is to establish goals for the space (programming), see what existing components might remain and continue to be utilized, and what elements must go. For example, reusing existing systems (HVAC, plumbing, electrical) can significantly reduce project costs. Updating restrooms and kitchens is more economical if existing fixture locations don’t need to be altered. However, if any of these systems need to be altered or replaced, costs can escalate quickly. The same applies to any structural modifications. If partition walls, conference rooms, and workstations are being rearranged, this can usually be more easily achieved. Once major structural modifications enter the equation, this will surely incur more extensive design and engineering costs in addition to an increase in the cost of the work. These types of alterations might include elements such as removing load-bearing walls, creating new openings for doors/windows, and potential structural changes resulting from MEP systems modifications.

Brokers, landlords, design professionals, and contractors sometimes use industry jargon differently, and it’s important that everyone speak the same language as it relates to renovations and the terminology used to define the scope of work. For instance, a “white box” (vanilla or warm shell) usually refers to a shell space, inclusive of a ceiling, main walls, and the structural floor (concrete or wood). Mechanical systems (plumbing, HVAC, electrical) are in the space, although the final layout may require modifications to these systems. “Grey box” (cold shell) would have the same unfinished floors, but any stud walls would be bare, there would be no ceiling, no plumbing or electrical, and the main HVAC system is likely to present, but there would be no controls or terminal distribution. In between, there is “2nd gen”, which is a term that often refers to a space that worked for a previous user/tenant, but will require some demo of walls and finishes, and relocation of diffusers, lights, outlets, etc.

In the commercial real estate environment properties are marketed as Class A, B, or C. These classifications are defined by BOMA International (Building Owners and Managers Association). When discussing the desired office environment, understanding these classifications helps to understand the range in costs (in both terms of rent rates and that of the quality of renovations to the space). Class A office space consists of the highest quality buildings, usually newer (within the last 15 years), have the top amenities, are well located in the market, and are typically professionally managed. Class B is a step down from A, is generally older, and may not be professionally managed. There may be some deferred maintenance issues. Class C are typically older than 20 years and located in less than desirable locations. They are usually in need of renovations like updates to the building infrastructure.

How Are Construction Costs Calculated?

Budgeting the hard construction costs is one of the trickier endeavors undertaken by construction managers, contractors, and estimators. This has become increasingly more challenging as material pricing has seen dramatic and rapid fluctuations over the past couple of years. Traditionally, those responsible for building budgets have a few tools at their disposal.

The first, and most often used tool is historic pricing data from similar projects. Estimators typically have a portfolio of previous project types full of final costs and quantities, and these costs are broken down by CSI (Construction Specifications Institute) division as a unit (square foot, cubic yard, lineal foot) price. Adjusting for annual escalation and market factors, these unit price costs are applied, providing a reasonable construction budget for a project (typically within 10% either way).

Another method of estimating is the utilization of online subscription-based tools such as RS Means Construction Cost Database. These programs are comprised of labor and material costs for each division of construction and associated materials. This is a more granular approach where an estimator could calculate the industry-standard cost of materials and labor for each scope of work, and then apply market adjustments for location and schedule.

Typically, the most accurate pricing comes from inquiring with the specialty trade contractors and suppliers that perform the various components of the work. Quality general contractors and construction managers keep a continual pulse on this sector of the industry to make sure they’re able to keep clients informed of any changes in the market.

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But Seriously, How Much Will It Actually Cost?

Construction costs vary greatly based on the type of construction, type of project, project location, and many other factors. For example, a 3,000 SF office build-out in Des Moines, Iowa will not cost the same as the same project in New York City. Wages, cost of living, and resource availability all factor into this cost difference. Using round numbers, office remodels in Des Moines, Iowa will range between $60 and $120 per gross square foot. This same project in New York City will range between $100 and $150 per gross square foot. This is where experienced estimators and design partners can prove to be invaluable.

Location is not the only factor in the cost of a project. Level of finish, use of the space, number of phases, and occupancy requirement (is the space occupied during construction) are a few of the other major cost drivers. Any quality estimate will take all of these, and many other conditions into consideration.

Here are some of the most common cost drivers for projects:

  • Restrooms and Kitchens: Restrooms and kitchens are the most expensive rooms in any project, due to the complex nature of the plumbing and electrical systems, as well as the finishes

  • Finish levels: Phrases such as “executive finish,” and “luxury” can be indicators that project costs will escalate quickly. Other terms, such as “corporate office,” and “general tenant,” may affect pricing.

  • “Generation” of space: The status of the space is normally referred to as the “generation” of the space. 1st generation (1st Gen) is a new space that has never been built out. 2nd Generation is a built-out space undergoing the first remodel. Typically, 1st gen space is the most expensive work to complete.

With no specific design details in mind, for someone wanting to understand what their project might cost, the following rules of thumb can be used as starting points:

A good starting point for a warm box renovation of a 5,000 SF commercial office space could be $50-70/SF. Renovation of a 2nd gen space of the same size might be $70-90/SF. Build out of a cold/grey shell space of the same size might be $75-100/SF. A significantly larger space might realize efficiencies of 5-15% and reduce the budget range accordingly. These budget ranges are applicable today in Des Moines, Iowa, but multipliers can be added to adjust costs for other markets.

Below is a brief list of the most common commercial office renovation questions. For the sake of brevity, all answers are based on work in a 5,000 SF Class A office in Des Moines, Iowa. These costs should be considered a ballpark range, as specific design and material choices can greatly impact the overall costs. These costs should be used as a guide and should not be considered an estimate.

Q: How much will it cost to repaint my space?

A: For a typical office, the cost to repaint walls, bulkheads, and door frames will be approximately $2.00 per square foot of floor area.

Q: How much will it cost to replace the ceiling tile in my office?

A: To remove and replace the ceiling tile, $3.00 - $5.00 per square foot of ceiling area, depending on the ceiling tile.

Q: How much will it cost to renovate our common area restrooms (new finishes and replace fixtures)?

A: For standard-sized restrooms, the cost will be $2,500 - $5,000 per bathroom fixture (each sink, urinal, and/or water closet)

Q: How much will it cost to upgrade the finishes in my office (flooring, paint, ceilings)?

A: Updating the finishes, without changing the wall or door layout, or modifying systems, will be $15.00 - $20.00 per square foot of floor area.



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