Is cost per square foot an outdated metric for measuring and benchmarking build-out costs? Many companies occupying space built out five or ten years ago often struggle to decide how much money to spend on building out progressive new space. Stories of build-outs for the cool tech giants and Fortune 500 companies often echo with a rumored price tag of over $100 per square foot. This can scare some less well-capitalized companies away from building great space, investing in ergonomic furniture and designing to reflect their cultures.
We suggest those companies look at a cost per employee metric, rather than a cost per square foot. As an example, the global architecture firm IA Interior Architects recently completed a build out for a start-up tech company in the Northeast. The costs per square foot to complete the build out were $125. Compare this to the average in that market of $70 per square foot. Seems expensive, right? However, this tech company built their space to a density of 114 square feet per employee. More traditional office build outs typically allot at least 200 square feet per employee. This tech company spent $14,250 per employee for space that is some of the most attractive I have ever seen. Had the tech company gone a more traditional route with more walls but less character, it would have cost them $14,000 per employee (assuming $70/sf multiplied by 200 sf/employee), and I don’t think it would have had the recruiting bank for the buck that the space they built boasts.
Aa an added benefit, had the tech company leased 200 square feet per person, they would be paying rent on 70,000 square feet of space, rather than 40,000 square feet. This represents a rent savings of more than 40%.
I spoke with a number of architects at IA regarding the optimal build out cost metric. The overall sentiment was that cost per square foot was not a good measure when the density of a planned build out was not going to match the existing density because, for example, either a company was adopting a “benching” layout or “free addressing” where employees are not assigned their own workspaces but rather use any available workspace when they are in the office.
When we work with clients, we help them identify the appropriate metric to measure whether a build out investment is justifiable to their business.
