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How to Categorize & Allocate Costs in Your Office Fit Out Budget

Kirsten Delcie November 23, 2020

One of the most difficult aspects of any fit out project is trying to estimate a budget. For the most part, it is difficult to nearly impossible for individuals to get quotes from contractors and construction companies, and knowing exactly what to include when drawing it up yourself is frustrating in itself.

To help you understand the process and what kind of expenses you can expect, we take a look at how to categorize and allocate costs when figuring out your office fit out budget:

Construction Budget Categories

There is no one number associated with an office fit out as each project will differ from the next and so will the cost. As such, it can be difficult to draw up a budget that is completely accurate and encompasses every single thing you might need. We advise that you consult with an experienced project manager to get the closest estimate possible.

In the meantime, we can provide you with a general overview of what might be included in your budget. An office fit out budget usually comprises five categories with all your different expenses falling into one of these categories:

  • Hard costs
  • Soft costs
  • Vendor costs
  • Contingency allowance
  • Project management fees

Naturally, no two budgets will be the same as the needs and requirements of each fit out will vary from project to project. Therefore, we cannot give you a hard-and-fast list of expenses as all might not apply to your particular plan. However, we can provide you with some of the most common costs included in each of these categories and what you can expect to budget for each one.

Hard Costs

Hard costs typically refer to the expenses that are directly related to the construction or physical development of a space, such as building walls, electrical and plumbing. These costs include design, financing and administrative expenses as well as the labour that goes into the construction.

Hard costs will make up the majority of your project costs, averaging 75% to 85% of your budget. These costs are also the most difficult to estimate without looking at the specific details of a project.

Examples of hard costs

General contractor costs:

  • Labour
  • Overhead
  • Profit

Installations & fittings:

  • Electrical
  • Plumbing
  • HVAC
  • Mechanical
  • Drywall, framing and acoustical ceilings

Materials (including shipping):

  • Structural materials, like partitions and building walls
  • Finish materials, like paint and flooring
  • Fixtures and appliances, like fire alarms, lighting and sprinklers
  • Furnishings, like office furniture
  • Plants

Hard costs are known to vary a lot depending on the quality of finishes and materials you choose and how many renovations you plan to make to the space.

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Soft Costs

In contrast to hard costs, soft costs do not include any physical changes to the workspace but still relate to the development of the office. These costs include the expenses and services necessary to complete the project. Soft costs include design, financing and administrative expenses as well.

The recommended allocation to soft costs in your budge is generally 8% to 12% of the total project cost.

Examples of soft costs

  • Architectural designs and services
  • Engineering services, including structural, MEP and Civil
  • Permit fees
  • Legal fees
  • Interior designer
  • Site analysis
  • Financing
  • Administrative fees

Soft costs vary to a lesser degree than hard costs but can fluctuate depending on the type of project and its complexity. However, in general, the costs will be easier to estimate than hard costs.

Vendor Costs

Vendor costs refer to a variety of miscellaneous expenses that might arise during the execution of your office fit out project. These costs can from 5% to 10% of your overall budget.

Examples of vendor costs

  • Cabling
  • Security
  • Moving
  • Signage

Like hard costs, vendor costs also vary from project to project. They mostly depend on the space being renovated, your needs and the terms of your lease.

Contingency Allowance

Any experienced project manager worth their salt will tell you that your fit out budget should always include a contingency allowance for unexpected expenses.

If your office is in a shell and core condition, the allowance usually falls between 5% and 10%, while for remodels it is 10% or more as you are likely to encounter more unexpected issues in second generation spaces.

Project Management Fee

If you want your office fit out delivered to expectations, on time and on budget, then we would highly recommend hiring an experienced project manager to oversee your project. The project management fee should be approximately 3% to 5% of your overall cost, but can vary depending on the size of your project.

It might seem as if a project manager is an unnecessary additional expense, but an expert in their field will typically save you money on your overall project cost and can help you avoid making costly mistakes.

If you are planning an office fit out and require a quality contractor and project manager who can bring your vision to life, get in touch with Contractors.Direct and we’ll connect you with our thoroughly vetted fit out specialists.

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