Picture this: your business is booming, clients who
have held off on visiting your office over the past two years are comfortable
with meeting in-person again, and your business projections for the next few
years look promising. Sounds great, right? But with all of this positivity
comes a fairly significant challenge: your current lease is soon coming to an
end, and you need to upsize your spatial footprint to keep up with
rapidly-increasing business demands.
After setting aside some time in your busy schedule
to scout out new locations, you find the building you think may be the perfect place
for your company’s new home. It’s a brand-new building (the last sheet of
Gyproc was just put up yesterday), close to all amenities and complementary
services, and you’d be located in a great part of town. All you need to do is
decide how you’d like to demise the space for offices and your showroom, find
suppliers for your furniture and lighting needs, hire a contractor to put up a
few demising walls and install a staff kitchenette and bathroom. You have the
names of some reliable contacts for all the services you think you’ll need, so
you’re confident that the finishing process will move quickly and everything
will fall into place. A couple weeks later, however, after spending far too
many hours of valuable time researching all your options, you reach the
conclusion that you’re just a little bit outside of your comfort zone and need
a professional to carry some of the load.
That’s where a broker can step in to help. First,
they will review your space wish list. They’ll provide you with any other space
options they believe will match your wish list, and can inquire as to the
details of any vacancies you’ve had your eye on. Some of the options they
suggest may currently be built-out with full offices, boardrooms, meeting
rooms, kitchens, washrooms etc., but when you review your options, you may
decide that none of them completely suit your needs, especially compared to
your original choice: the brand-new space, fresh on the market, that’s ready to
be built-out in such a way that you can achieve the exact layout desired to
maximise efficiency in your space.
Brokers will tour through the space with you,
taking stock of all the key components that will need attention: they notice
the unfinished concrete floor, exposed ceiling, unpainted Gyproc walls, and
anything else that catches their trained eyes. They’ll notice the HVAC,
plumbing, and electrical that is only running to your unit, not yet throughout
the whole building. They will discuss potential layouts based on your
needs, and the landlord may provide a space planner to help bring to life your
vision for the space. Once a solid plan is in place, you’re feeling confident
that the price of the project will be pretty manageable. When the space
plan comes back and the budget is calculated, you are shocked with the quote
from the general contractor… “I could build a new house for that price!”.
According to recent research, the
average cost to fully build out a typical office space ranges between $221 and
$323 per square foot, depending on geographical location and the desired quality
of finishes. This figure has increased significantly over recent
years, due in part to supply-chain shortages, rising costs of materials,
general fluctuations within the market, and inflation; however, we can use it
as a starting point. Typically, a landlord will include a tenant
improvement allowance within the asking net rent to help offset these
costs. The remainder is to be paid by the tenant. There
are a few options of handling these costs: a tenant can cut a cheque for the
entire amount (this may have an accounting benefit), the tenant may amortise
the amount over the lease term and pay back to the landlord as part of the
rental payments (this helps spread the costs over the lease term, but the
landlord typically charges interest on this amount) and/or a combination of
both options. The landlord will make these concessions based on the strength of
the covenant of the tenant and the length of the lease term.
Construction items to consider when building a
space from a raw state:
Partition Walls (Metal Studs and Gyproc): Even
in an open concept space, washrooms, meeting rooms, etc. must be partitioned
from the main space.
Flooring: Flooring can range from carpet
tiles to laminate flooring to ceramic tiles and anything in between. Carpet
tiles can be among the more cost-effective flooring options, while ceramic and
porcelain tile are among the more expensive flooring types.
Paint: Fortunately, paint is paint.
Ceiling Tiles: A suspended T-bar ceiling grid
can help improve sound nuisances within an office.
Lighting: There are many lighting options
available today, including more efficient LED lighting.
Electrical Distribution: In a
new build, the landlord typically brings electrical into the unit, but in some cases,
it is the tenant’s obligation to install a transformer and then
distribute the electrical throughout the unit (outlets, drops, etc.).
HVAC Distribution: Again,
the landlord will typically run HVAC to the unit, but it then becomes the
tenant's responsibility to distribute the HVAC throughout the unit. This
will depend on the unit layout; an open concept office will require less
distribution and diffusers than a fully built-out space with all private
offices.
Plumbing: The landlord will have a plumbing
stack to the unit, but it then becomes the tenant’s responsibility to
distribute throughout the unit. It is more cost effective to keep all plumbing
in the same vicinity as this avoids the need to cut into concrete to run pipes
(which significantly drives up construction costs).
Millwork: Millwork comprises of kitchen
cabinets, storage cabinets, washroom counters, etc. These items will depend on
the space design.
All of these items add up, and tackling them by
yourself may be quite overwhelming. That is why a broker is committed to
working tirelessly on your behalf to ensure your vision can come to life, while
sticking to your budget as closely as possible!
Our Brokerage Team has extensive experience in handling complex leasing and sales transactions, which often include assisting clients in navigating the sometimes-complex build-out and fit-up process. If you need help with your commercial property acquisition or leasing requirements, a member of our Team will be happy to assist you through every step of the transaction. Contact Ashley, Emily, or James via email or at (902) 429-1811.