Office guide highlights costs, benefits of remote work models

Technology costs also are expected to rise in coming years.
Offices that have a mix of personal and shared workspaces may become more popular as some employees spend a portion of their week working from home. Courtesy JLL

As the COVID-19 vaccine sees further widespread adoption, companies are actively rolling out return-to-office plans.

JLL recently released its 2021 U.S. and Canada Office Fit Out Guide, which offers a proprietary cost matrix of benchmark build-out costs across U.S. and Canadian markets. The guide serves as a comprehensive data-driven tool that provides office occupiers with cost transparency across office styles, build quality levels and geographic markets to enable them to make better and more informed real estate decisions.

The data in the report is based on an analysis of thousands of construction projects managed by JLL Project and Development Services (PDS) teams across North America.

“There is no single solution that answers how offices will change in a post-pandemic world,” said Todd Burns, president of project and development services for JLL. “The only constant will be that flexibility and choice will be key elements of all future office planning. These factors will bring broad implications across the future of office real estate for decades to come.”

JLL recommends readers use the report for early pre-project planning to get a sense of what different types of construction projects might cost across different markets, and also for post-completion comparison to learn how the costs of the completed projects compared to average projects around the country.

Scott Rantala, market lead for JLL’s Project and Development Services team in Grand Rapids, said JLL uses it with clients as a guide to set expectations. It’s not meant to be a cost-estimating device, so much as a rule of thumb for planning.

“Very early on in a project, when we’re talking with a client, we’re trying to investigate what type of space do they really want, and this is a great starting point for them to review the different types of offices,” Rantala said. “Are you in the white-box low cost, medium cost, or do you have that high-end?”

The national average cost of a new office fit-out varies based on space quality and complexity and office style. For example, occupiers looking for a progressive office space marked by an open floor plan that encourages small group collaboration may pay $155-$225 per square foot depending on the quality of the space.

Additionally, tenants wanting a more traditional build-out with private offices and dedicated conference rooms may end up paying $168-$243 depending on the quality and complexity of such an office space.

New York City holds the title as most expensive city for office fit-outs in 2021 ($233 per square foot), followed by the San Francisco Bay Area ($175 per square foot). At the other end of the spectrum, the south and southeast sections of the U.S. are the cheapest areas in which to build. The three Texas markets of Austin, Fort Worth and San Antonio rank as the cheapest major markets for office construction this year.

Rantala said Midwest “second-tier” cities like Grand Rapids are great places to build an office fit-out compared to coastal cities in New York and California, or even in Chicago. Comparatively, the cost of constructing a new office in a city like Grand Rapids is more manageable.

Occupiers considering transforming future office space with less density, increased technology implementation and a focus on sustainability and wellness will want to consider the costs and benefits of these office trends.

Partially remote workforce

Over half of corporate employers expect employees to work from home two days a week on average, and 72% of employees want to continue working from home, even post-pandemic, according to the latest JLL research.

With any given employee not in the office two days a week, fewer companies will provide every employee a permanent and dedicated desk. Instead, some future office designs will place a greater emphasis on custom collaboration and community spaces, with a smaller share of the office footprint dedicated to standard workstations.

In this scheme, the workstations that remain will generally be available on an as-needed basis, rather than dedicated to employees with a one-to-one ratio. Mobility-focused offices without dedicated seats are nothing new, but are expected to become more common, or be incorporated as one element of the larger overall office design in more projects, JLL said.

From a cost perspective, this means a more carefully designed and customized office that meets the needs of multiple overlapping users on any given day. On a per-square-foot basis, the cost of a mobility- and collaboration-focused office design will generally be higher than a standard layout with primarily dedicated workstations.

On the other hand, some occupiers may consider slightly smaller footprints given that fewer employees will be using the office at the same time. The right balance will depend on each company, but a reduced footprint could potentially offset a higher cost per square foot, leaving the total capital cost of a project unchanged.

“I’ve had a few clients that have gone to reducing their space because of remote working opportunities … but what I think is happening is, even though some of the staff is working remotely, you’re changing your space to accommodate more of the collaboration, conferencing, having some of those amenities, that you’re almost making up for the space that you lose by having people removed, so you’re almost staying where you’re at,” Rantala said. “I’ve got a feeling the square footages will stay where they’re at, but it’s what type of space is being built in there.”

Technology support

Another critical piece of an office where employees work from home a couple days a week is a greater need for technology. While makeshift remote setups worked during the pandemic, a permanent shift to virtual collaboration will require a re-imagination of the technology setups in many existing office designs today.

The cost implications of reformatting technology will directly depend on both the scope and the quality of the technology being integrated into a workplace. Within each project budget, the share of spend being dedicated to technology is expected to grow for most companies over the coming years.

Anyone planning to build or renovate an office this year should carefully reconsider any technology budget based on past assumptions, and exercise caution before relying on benchmarks from previous years. JLL forecasted the quantity of technology in an average office will continue rising, which will mean increased complexity to support a more robust technology suite.

Wellness and sustainability

The shift toward sustainability and wellness in office design and construction was in place long before the pandemic, and only accelerated because of it. While many pandemic-specific safety measures will subside this year along with the health risks from COVID-19, an increased awareness and focus on health and well-being will be permanent.

The most straightforward markers from the design and construction perspective are the common certifications that office fit-out projects seek, including LEED and WELL certifications. The upfront cost of any sustainability or wellness certification generally includes both higher construction costs and a fee to apply for and receive the certification.

“When you go through the whole LEED and WELL certification process, there are additional costs to upgrade your building, but in the long run those upgrades usually pay for themselves anyway,” Rantala said. “So, I think there’s a lot more buildings that are going toward some type of certification for sure.”

For purely wellness or health-focused features, the return on investment cannot be quantified in dollar figures, but it will have positive returns in employee health, engagement and retention, he said.

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