Office Construction and Build-Out Cost: How to Plan and Budget

Estimating the cost of an office build-out can be a daunting task, with challenges in obtaining a complete scope of the project that will help you receive accurate quotes from general contractors. If you don’t identify everything included in your project, you won’t receive an accurate number.

At AQUILA, our experienced project managers have extensive expertise in creating budgets for numerous tenant improvement projects and office build-outs that include the help of general contractors on the front end. We work closely with general contractors in order to get up-to-date market pricing.

In our comprehensive article, we aim to guide you through the process and provide valuable insights, covering:

• The primary expense categories included in a construction budget
• Essential line items to include within each category
• The anticipated allocation of your budget across these categories

Office Build-Out Cost Categories

For the most accurate estimate, it is advisable to consult with a project manager who can tailor the budget to your specific project requirements. Nonetheless, as a general outline, the common expenses can be categorized as follows:

• Hard Costs
• Soft Costs
• Vendor Costs
• Contingencies
• Project Management Fees

Below we will examine what is included in each of these categories and what you can expect to budget for each one.

Hard Costs

Hard costs encompass the tangible renovations involved in the space, such as structural modifications and HVAC upgrades. These costs typically constitute a significant portion, approximately 75% to 85%, of the overall project budget. Estimating hard costs accurately necessitates a thorough examination of project-specific details.

Here are common hard costs observed by our project managers in the Austin area:

• Paint and Carpet
• Electrical
• Plumbing
• Mechanical
• Framing and Drywall
• Doors and Glazing

The variability of hard costs is contingent upon factors such as the chosen finishes’ quality and the extent of the scope.

Soft Costs

Soft costs, distinct from hard costs, do not encompass physical alterations to the space. Rather, they encompass the expenditures and services essential for project completion. Typically, soft costs constitute approximately 8% to 12% of the total project budget.

Some examples of expenses falling within this category include:

• Architectural designs
• Permitting
• Legal fees

Soft costs exhibit variability based on project type and complexity.

Not sure what the differences between hard costs and soft costs are? Quick Answer: Hard Costs vs Soft Costs for Office Build-Out Budgets

Vendor Costs

Vendor costs encompass miscellaneous expenses that may arise during your project. These expenses typically account for approximately 5% to 10% of your overall budget.

These costs can include:

• Cabling
• Security
• Moving
• Signage
• Furniture*

*Though furniture is considered a vendor item in the budget, it is not included in the above vendor cost percent range (5% to 10%). If you are planning to purchase all new furniture for your project, that cost can be substantial. Working with your project manager on the front end to determine this cost is essential to accurate budget planning. Typically, furniture (if new) is the second-largest amount in the budget besides hard costs.

Similar to hard costs, these expenses are highly reliant on the unique aspects of the project, including the nature of the space renovation, the tenant’s requirements, and the lease terms.

Contingency Allowance

It is prudent for an experienced project manager to incorporate a contingency allowance into the budget to account for unforeseen expenses. Even if you opt not to engage a project manager, it is still advisable to include a contingency allowance in your own budget.

For projects involving “shell” condition spaces, the typical contingency allowance ranges from 5% to 10% of the overall project cost. However, remodel projects often require contingency allowances of 10% or higher due to the increased likelihood of encountering unforeseen conditions in second-generation spaces.

Project Management Fee

The final element to consider in your budget is the project manager’s fee, which applies if you opt to engage their services for your project. Generally, this fee ranges from 3% to 5% of the total project cost, although it can vary depending on the project’s scale.

While this may seem like an additional expense, a competent project manager typically delivers cost savings for your project as a whole and helps prevent costly errors.

Read Now: Cost to Hire a Project Manager for an Office Build-Out or Renovation (Prices/Rates)

Build-Out Cost Bottom Line

The following chart illustrates a standard office build-out cost budget. Our seasoned project managers have observed that this breakdown remains consistent across projects of varying sizes.

To start budgeting for your office build-out, download our handy, interactive Office Build-Out Budget Template.

Still Need Assistance Estimating Your Build-Out Cost?

If you find yourself uncertain about the components of an office buildout project budget or face challenges in gathering the required estimates, you need not navigate this process in isolation. Our project management team is readily available to meet with you, offering guidance and expertise to construct a precise cost estimate for your project.

If you would like assistance with your office buildout budget, set up a consultation with our project management team today.

Or if you’d like to learn more about building out your office space read our Ultimate Guide to Building Out Office Space.

• What is a Tenant Improvement Allowance and What Does it Cover?
• Cost to Hire a Project Manager for an Office Build-Out or Renovation
• What is an Amortized Tenant Improvement Allowance & How Can It Help Pay for My Office Build-Out?