Rising office fit-out costs reflect both inflationary dynamics in the construction sector and emerging design trends as employers realign space to engage their hybrid workforces. JLL’s newly released benchmark report, drawing on data from 3,800 fit-out projects in 58 markets across Canada and the United States, pegs the average year-over-year cost increase at roughly 10 per cent between 2021 and 2022.
That’s further calculated as a 14 per cent jump in hard costs for construction materials and services, a 9 per cent escalation in soft costs for design and other professional services, and a 5 per cent increase for furniture, fixtures and equipment (FF&E). However, new office fit-outs are generally encompassing less area than in the pre-pandemic era. JLL cites an average 11 per cent decrease in space covered since 2020, and acknowledges that cost escalation on a per-square-foot basis “may be more aggressive than increases in total project cost”.
Yet, while footprints shrink, office fit-outs are incorporating new configurations, amenities and ESG criteria that have other cost implications. The two most commonly requested add-ons arising from JLL’s data are: wellness rooms, coming in as a USD $11,000 to $15,000 (CAD $15,000 to $20,000) budgetary item; and gender-neutral bathrooms, which typically equate to an expenditure of USD $18,000 to $22,000 (CAD $25,000 to $30,000). Meanwhile, fit- outs to comply with green lease commitments could involve higher upfront costs to help realize ongoing operational savings.
“Design trends played a major role in cost increases in 2022,” the report states. “The increasing prevalence of additional features is part of the broader reimagining of the post-pandemic office; minimally supportive workspaces are no longer standard.”
The benchmark is expressed as 9-point pricing matrix, including average fit-out prices for three different types of office formats at three levels of quality and complexity: base; medium; and high. The office formats are categorized as:
- Progressive, featuring a completely open plan with no enclosed offices or assigned seating and a 50/50 split between bench-style workstations and collaborative space;
- Moderate, featuring a predominately open plan with workstations in the 6’x6’ to 6’x8’ range with about 20 per cent of the space for enclosed offices and about 30 per cent for collaborative use; and
- Traditional, featuring a higher ratio of enclosed offices of varying sizes, 8’x8’ assigned workstations and little open collaborative space.
Across JLL’s total project database, the average fit-out cost at the low end, for a base-level progressive format is benchmarked at USD $220 per square foot (psf) (CAD $299 psf). At the upper end of the scale, fit-out costs for high-calibre traditional space are benchmarked at USD $320 psf (CAD $435 psf).
Drilling down, the report provides a comparison of average costs for a medium-level moderate office fit-out in all 58 surveyed markets. In this, the four Canadian markets — Vancouver, Calgary, Toronto and Montreal — record costs slightly to more significantly above the overall average of USD $257 psf (CAD $350 psf).
The highest fit-out costs were recorded in Calgary, with the average at USD $271 psf (CAD $371 psf), while Montreal came closest to the benchmark, with average costs of USD $258 psf (CAD $351 psf). Elsewhere, the average cost was USD $263 psf (CAD $359 psf) in Vancouver and USD $268 psf (CAD $367 psf) in Toronto.
Looking to the United States, the priciest markets are San Francisco, with average fit-out costs of USD $293 psf and New York City, with an average of USD $292 psf. The lowest prices are recorded in Austin, at USD $215 psf and San Antonio, at USD $216. Texas’ two other major cities are also bargains relative to the overall benchmark, with average fit-out costs at USD $220 psf in Houston and USD $222 psf in Dallas.
“One of the largest factors in determining the ultimate cost of an office fit-out project is the cost of construction labor, which varies more widely by geography than the cost of materials,” the report advises.
