Fitting Out – the Hidden costs of Moving

David Lawson - 2002


Moving home is regarded as the most traumatic experience anyone can face other than bereavement or divorce. It is no less painful for businesses, and often much worse. You will rarely have to roll up your sleeves and provide the interior walls  and fittings of a home, or budget for ripping out the old ones. Yet this is common for firms moving into new offices.

   It can turn business planning into a nightmare. Companies may pick a building because headline rents seem reasonable but then have to factor in the expense of boosting power supplies, moving partitioning and all the other extras. And  this  can vary enormously from building to building and country to country.

  ‘First there are local laws which say in France, for instance, that managers must have their own individual offices or in Germany that people must be within a certain distance of windows,’ says Matthew Cutts of project managers Citex.  ‘Then there is the question of how much a developer or landlord will contribute to the costs.’ This will vary according to local market conditions. If there is a lot of space to choose from, a tenant may be able to negotiate a bigger incentive.  

   This can make a significant difference to occupation costs. Last year  tenants in London paid 64% of fit-out costs compared with 57% in Paris and less than 50% in Frankfurt, according to the annual Corporate Quantum report by property consultant FPDSavills and cost consultant Hanscomb. An average 500sq metre office with a workforce of 25 people cost more than Euro1600 per sq metre in London compared with just over Euro1,100 in Paris and less than Euro800 in Frankfurt, inclusive of professional fees.  

  So what more can a developer do to ease this pain? It is almost impossible to provide a finished product because each tenant will have its own requirements. Even something as basic as the carpet is commonly torn out because it does not match a company’s branding or style, says Cutts. ‘That can add Euro23-Euro60 a sq metre.’

  Some tenants would ideally like buildings in ‘shell and core’ condition – just the bare bones they can flesh out themselves.  But that adds to time and cost. Cutts points out that it can take six months for a team of professionals working on a headquarters building which might add Euro570,000 to the bill for a Euro3.5m fit-out.

  Most tenants welcome a compromise, where the building is designed with the foresight and flexibility to cope with upgrades and alterations quickly.  Business disruption can be even more expensive than fitting out, so speed is essential. But rushing can backfire. One major international bank decided not to wait for a suitable new building in Frankfurt and tore out an older one to create a dealing floor. It cost three times as much as fitting a brand new office – and even that would probably have been met mostly by the developer.

  ‘The most important thing any developer can provide is flexibility and security,’ says David Hopkins, who looks after buildings for ExxonMobil. Big floorplates are important for dealing rooms and can save spreading staff across several levels. But they must be capable of sub-division, so tenants can expand or contract. Occupiers also prefer their own risers in multi-tenanted buildings to protect commercially-sensitive information on data lines. With extra capacity thrown in, of course, in case they want to add more cables. Space for extra generators is another bonus developers can provide – preferably in cheap basement areas.

  Lack of space to expand services in this way is the most common source of complaint among  tenants.  Some developers have a tendency to cut corners by building to the lowest level rather than risk spending extra  on spare capacity. The ‘intelligent’ ones go that extra distance, says Andrew Rabeneck of Interior, the fit-out specialist. They know they will let buildings quicker and recoup costs by producing a future-proof building.

   Courage is another factor that marks out the better developers. It is easy to perpetuate traditions, such as building cellular offices in Germany for local tenants. Yet international firms want wider spaces they can chop and change to suite their needs..

  The ideal solution is for developer and tenant to work together planning specifications. That can’t always happen: in the UK, for instance, tenants usually like to see a building fitted out before making a decision – even if that means ripping out many of the fittings later. But the better builders have the discipline to freeze activity once a potential occupier comes on board, says Cutts.

  This should not be a problem if the original designs are solidly based on an appreciation of what modern tenants demand rather than kept to the lowest common denominator.