Published July 30, 1999 in the DENVER BUSINESSESTATE JOURNAL
Office Relocation Costs More Than Money
by Warren Kieding
IF YOU'RE LOOKING FOR OFFICE SPACE, you can count on at least two things: the process will take longer than you'd thought and cost more than you'd hoped. The schedule and budget required to get an office space ready for operations can shape the future of the entire lease period, a fact that far too many tenants fail to recognize until it's too late.
All too frequently, by the time tenants have made the decision to relocate, the project is already behind schedule. It sounds ludicrous, but it's true. So how much time is enough time?
The safest planning methodology is to do it backwards. That is, start with the drop-dead occupancy date and back out when each of the following steps must occur to meet the schedule:
Beginning date of operations in the new space.
Physical move or installation of new furniture or furniture systems. Generally allow a minimum of two days for the move and one or two weeks for any significant installation of furniture systems.
Installation of telephone and data cabling and systems. This may or may not coincide with the tenant finish construction and installation of furniture systems. Early planning and diligent coordination are key to preventing delays here.
Interior construction of tenant improvements by the general contractor. Plan on a minimum of eight weeks for construction, depending on the size and complexity of the project. Typically, the shorter the construction time allowed the more expensive the costs, especially if overtime and shift work are required.
Working Drawings. Plan on a minimum of a week to a week and a half for interior architectural services; a little longer for engineering.
Furniture / Furniture Systems Orders and Delivery. Immediate access to readily available furniture can be tricky at best. The schedule here can range between six weeks and twenty-seven weeks depending on available stock, custom items and delivery snags.
If you add up the rough timeframes just quoted, we have identified three and a half to four months of time-sensitive tasks from the start of working drawings to the date of occupancy. But that's not all there is to consider.
In order to even begin working drawings, the office space must be selected, the lease must be signed and all pertinent decisions affecting the use of the space must be made.
Additionally, the space should have been planned and priced out by the architect which generally requires at least a week. The remainder of the schedule hinges on how long or short it takes for tenant, real estate broker and landlord(s) to make the deal happen. In general, allowing eight to nine months from the time the decision is made to relocate until the occupancy date is about what it takes for the process to run its course. Anything less risks hurried decisions, additional costs and of course, more than the usual amount of stress.
It's almost a certainty that tenants underestimate both the cost of operational space and the tenant finish allowances landlords are willing to pony up. Even when quoted landlord allowances are enough, tenants all too often experience sticker shock when they realize the scope of other costs associated with getting their operations moved and up and running in a new or remodeled space.
So what are all these costs, anyway? In general, they fall into two categories:
Real Property Improvements (Tenant Finish)
General construction costs. These can be $20, minimum per square foot for second generation leased office space; $25 per square foot or more for new office building space; or $30 or more for new 100% office space in a single-story office/warehouse location or "flexspace" building.
"Soft-costs" for architectural and engineering fees. $1.50 per square foot or more.
Project Management Fees. A number of developers and landlords will charge up to five percent of construction costs for project coordination or similar project management services frequently contracted by the tenant. This can cost another $1.00 or so per square foot.
Furniture, Installation and Moving Costs.
Telephone and data cabling and systems. Cabling is generally charged by the number of "drops," or lines of communication for telephone and computers that route from a main hub. The average drop is less than 150 feet, and runs approximately $70 for Category 3, or voice-quality cabling, and $100 for Category 5, or data-quality cabling. This translates to roughly $ .75 to $ 2.00 per square foot, or more.
Furniture and Furniture Systems. A typical new six foot square or eight foot square workstation ranges from about $3,500 and up, or about $18 per square foot, minimum, assuming that each staff positions averages about 200 square feet of space.
Moving Costs. These costs range from about $ .75 per square foot for operations receiving mostly new furniture installed by a separate vendor to $ 1.00 per square foot for a full relocation of existing furniture and equipment.
Excluding printing costs, new telephone systems and other equipment, a tenant can reasonably expect to pay between $ 24.00 per square foot in second generation office space with no new furniture to $ 53.25 per square foot in new "flexspace" offices with new furniture.
Regardless of the chosen option, knowledge of all the relative costs, and the time it takes to implement the schedule should be the tenant's first step in developing a strategy for relocation success.