The Cost of an Office Build-Out

by CoyDavidson on November 30, 2011

A key component of any lease negotiation is the tenant improvement allowance provided by the landlord to build-out or retrofit an office space for the tenant’s specific use.

One of the first questions every tenant has when considering either new or refurbished office space revolves around how much will build-out or tenant improvements (T.I.) cost? The tenant’s cost exposure is a key factor in the decision making process and important component in determining your projected total occupancy cost.

Projecting build-out costs beyond general ranges is challenging without the benefit of the space planning process, and so many building type options and lease size parameters that affect this estimate. Our friends at Kirksey Architecture provided this Tenant Improvement Cost Guideline.

Tenant Improvement Costs: Updated 2017

($41 to $50/sf in 2016)

The most basic applicable space in a type A building, but using all new components – 18-cell parabolic lights, standard 2×2 ceiling, plastic laminate building standard doors with mortised hardware, no glass at office fronts, minimal millwork and all plastic laminate, $25/yd broadloom carpet, standard electrical and HVAC.

($54 to $71/sf in 2016)

Upgraded with 2×4 recessed direct/indirect light fixtures, 2×2 fineline ceiling, wood veneer building standard doors with mortised hardware, full-height glass office fronts in aluminum framing system, more extensive plastic laminate millwork with solid surface countertops throughout, $35/yd carpet tiles, more extensive electrical service with 24/7 server room AC and two supplemental fan-coil units for conference room zones.

($88 to $145/sf in 2016)

Upgraded with some drywall ceiling areas with indirect cove lighting, architectural woodwork doors and frames, glass office fronts in matching wood framing; 30% of wall areas as premium-grade architectural woodwork, 40% with acoustical fabric wallcovering, 30% as painted drywall; extensive wood veneer millwork with granite countertops, $45/yd broadloom carpet, more extensive lighting and custom fixtures for artwork and accent areas.

FURNITURE: $18 to $60/SF
($18 to $60/sf in 2016)

Building standard office space: $18 to $28/sf
Mid-range office space: $22 to $36/sf
Executive office space: $42 to $60/sf

Learn more about Colliers Tenant Representation Services

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Lucy Price December 27, 2011 at 9:53 am

Tenants should also check their area for any rebates, incentives or concessions the local government or utility is offering to build-out energy efficient space.  Efficient T8 lighting, motion sensors, high efficiency split systems for server rooms and the like could qualify for rebates from the local utility and possibly tax advantages, for which tenants should consult their accountant.  For futher information check for what is available in jurisdictions accross the U. S.
The incentive will help pay for the difference in cost,between energy efficient and code, if there is any, plus reduce the building’s electricity cost.  That’s a plus for both sides of the table.

Jwalkerinmd February 14, 2012 at 7:08 am

This is good insight and I like Lucy’s comment below.  I would think that the variance in TI costs would largely be a function of the labor rates for each market across the U.S.

MonkeyMan October 2, 2014 at 2:42 pm

Oh indeed. If union workers are required the labor cost will skyrocket.
To the Moon!

Lynn Richter February 26, 2016 at 9:01 am

Very good and insightful article. Another factor is that now contractors will not guarantee their prices for more than 30 days, in some cases, less. In some markets building permits take 4 to 14 weeks, plus the during construction inspections can slow the next step down. Some contractors place a contingency in their budgets for the unknown within the space or building I.e. Code changes or tenant changes. All of this has an impact on the total cost and who eventually pays for it. We are seeing construction costs slow the lease and the purchase timelines down. This is especially true when the initial costs come in far in excess of the allowance and of what both tenant and landlord expected. Going back to the drawing board to eliminate or change buildout, then out to rebid the budget all adds about 30 days over all. thus making it all the more important for tenants to visit their requirements father in advance of their required occupancy.

Patricia Cornelison March 21, 2016 at 8:34 am

Do the costs here represent typical costs in Houston only? Do you think it would be reliable to calibrate the costs for other geographic locations using area cost factors?

EL October 19, 2017 at 5:50 pm

We are looking to renovate an existing office space around 20k-30k SF in LA. How much should I expect to pay to the contractor total $/SF. I’m seeing reports for SF coming in aroun $120-$130/SF.

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