A new report on office fit-out costs in North America sets out to establish a range of benchmarks for three different office styles, and to suggest what businesses favor which style.
JLL’s project and development services group, which produced the report, used data from more than 2,800 JLL-managed project budgets for over 100 clients from 17 industries in 59 markets throughout the U.S. and Canada.
The goal, says JLL, is to “elevate the conversation” around the real costs of building out various real estate designs. This year’s report includes office layout and space quality components to allow for evaluations of different office layouts, project complexities, and materials. It also provides high, medium, and low allowances for furniture, fixtures, and equipment (FFE); as well as for the installation of audio-visual and security equipment.
The result is an Office Fit Out Matrix, which shows how a handful of dynamics affect fit-out costs. Depending on the market and style, the costs range from $120.18 per sf to $216.07 per sf (see chart).
JLL breaks down these costs by region and metro market. The Northeast and Northwest consistently have higher fit-out costs. The medium costs in New York City are 28.5% above the U.S. average. In San Francisco, a fit-out would cost 22.6% more than the U.S. average. Conversely, the medium fit-out costs in West Palm Beach, Fla., are 15.9% below the national average; in Austin, Texas, 15.3% below.
This office fit-out matrix is based on data from over 2,800 project budgets in North America that JLL managed. Image: JLL
JLL's matrix compares the medium costs for fitting out three different office styles. Image: JLL
Three office styles examined
JLL divides its office fit-out costs along three styles:
• A Traditional office is still the most expensive to fit out. This style has the highest percentage of private office spaces, and typically between 20% and 50% fewer employees than the other two styles. Its FFE costs are the highest among the three styles, too. And tenant factors are “relatively small,” says JLL, because there is less common area. These offices are still favored by law firms, financial services companies, and businesses that focus on privacy with their offices.
JLL observes that some Traditional office styles are introducing lower-partition bench desks.
• A less-expensive fit-out, a Moderate office style features “agile” floorplans, with 10% dedicated to enclosed offices, and the rest of the space open with 6x6-foot workstations and minimal benching and guest space. Moderate offices—which are 20-25% less dense than Progressive office styles—include a healthy mix of conference rooms, and a few multipurpose and collaborative spaces. The hard fit-out costs for the Moderate style are average, but cost efficiencies can be captured by adding more bench-style desks.
• The Progressive office style is distinguished by an open floorplan, 100% of its desk space outfitted as bench-style furniture with zero enclosed spaces. This style’s focus is on activity-based working. Its employee density is 20-50% higher than a Traditional office, and it has double the amount of collaborative and conference spaces. (A standard plan would include 20 conference rooms and seven open collaborative/multi-use spaces.)
JLL points out that Progressive fit-outs generally have higher technology costs, but save money on FFE spending.
Landlords allowing for more upgrades
Last year, nearly 69 million sf of new office space were delivered to the market, but only 47.4% was preleased. JLL’s report observes that landlords are spending more to compete for tenants that are consistently gravitating toward high-quality spaces and assets. Consequently, landlords are offering better tenant improvement packages.
JLL cites several reasons for this trend, including the steady climb in construction costs, which increased on average by 15% last year. Landlords also offer better tenant improvement packages to offset the impact of higher rents.
The national average for tenant improvement allowances was $44 per sf, ranging from $105/sf in Washington D.C. to $28/sf in Nashville.
The report provides detailed snapshots of several markets, such as Austin, one of the country’s dynamic office markets, with robust growth supply. There are 3.1 million sf of new office space in Austin’s pipeline, 36% of which is preleased. The average tenant improvement allowance there last year was $45/sf.
There’s 7 million sf of new office space in the pipeline in San Francisco, where the office vacancy rate is 9.1%, and 68.8% of new space is preleased. The average tenant improvement allowance in San Francisco last year was $60/sf.
Related Stories
Mixed-Use | Jun 12, 2023
Goettsch Partners completes its largest China project to date: a mixed-used, five-tower complex
Chicago-based global architecture firm Goettsch Partners (GP) recently announced the completion of its largest project in China to date: the China Resources Qianhai Center, a mixed-use complex in the Qianhai district of Shenzhen. Developed by CR Land, the project includes five towers totaling almost 472,000 square meters (4.6 million sf).
Mixed-Use | Jun 6, 2023
Public-private partnerships crucial to central business district revitalization
Central Business Districts are under pressure to keep themselves relevant as they face competition from new, vibrant mixed-use neighborhoods emerging across the world’s largest cities.
Energy-Efficient Design | Jun 5, 2023
Implementing an ‘asset drawdown strategy’ for site decarbonization
Solidifying a decarbonization plan via an “asset drawdown strategy” that carefully considers both capital and operating costs represents a game-changing opportunity for existing properties to compete with new projects.
Office Buildings | Jun 5, 2023
Office design in the era of Gen Z, AI, and the metaverse
HOK workplace and interior design experts Kay Sargent and Tom Polucci share how the hybrid office is evolving in the era of artificial intelligence, Gen Z, and the metaverse.
Urban Planning | Jun 2, 2023
Designing a pedestrian-focused city in downtown Phoenix
What makes a city walkable? Shepley Bulfinch's Omar Bailey, AIA, LEED AP, NOMA, believes pedestrian focused cities benefit most when they're not only easy to navigate, but also create spaces where people can live, work, and play.
Mixed-Use | Jun 1, 2023
The Moore Building, a 16-story office and retail development, opens in Nashville’s Music Row district
Named after Elvis Presley’s onetime guitarist, The Moore Building, a 16-story office building with ground-floor retail space, has opened in Nashville’s Music Row district. Developed by Portman and Creed Investment Company and designed by Gresham Smith, The Moore Building offers 236,000 sf of office space and 8,500 sf of ground-floor retail.
Office Buildings | May 24, 2023
The future of work: What to expect in 2023
While no one disagrees that the workplace has undergone tectonic changes, it is less clear how to understand these shifts and synthesize them into practical action for the coming year.
Multifamily Housing | May 23, 2023
One out of three office buildings in largest U.S. cities are suitable for residential conversion
Roughly one in three office buildings in the largest U.S. cities are well suited to be converted to multifamily residential properties, according to a study by global real estate firm Avison Young. Some 6,206 buildings across 10 U.S. cities present viable opportunities for conversion to residential use.
Headquarters | May 16, 2023
Workplace HQ for party clothing company Shinesty celebrates its bold, whimsical products
The new Denver headquarters for Shinesty, a party clothing company, was designed to match the brand’s fun image with an iconic array of colors, textures, and prints curated by the design agency, Maximalist. Shinesty’s mission, to challenge the world to live more freely and “take itself less seriously,” is embodied throughout the office interior.
Office Buildings | May 15, 2023
Sixteen-story office tower will use 40% less energy than an average NYC office building
This month marks the completion of a new 16-story office tower that is being promoted as New York City’s most sustainable office structure. That boast is backed by an innovative HVAC system that features geothermal wells, dedicated outdoor air system (DOAS) units, radiant heating and cooling, and a sophisticated control system to ensure that the elements work optimally together.