Office Relocation Costs
Just 1 in 3 construction projects finish less than 10% over budget! Moreover, the average cost overrun for construction projects is 22%. Unfortunately, office relocation is no different. Many projects encounter cost overruns. Often, this is due to hidden costs that the client did not see coming.
An office relocation is an exciting project. It promises you a fresh start in a new workspace. A workspace tailored to your culture that reflects and enhances the way your people work – a true home for your company.
However, this excitement is tempered by financial risk. An office move is a huge project that requires significant investment. On top of that, there is the risk of hidden costs that send your project completely over budget. Furthermore, they don’t just increase costs: they waste time, create delays, and cause friction.
As a workspace design & build company, we work on dozens of office moves every year. All too often, we speak to companies that have been burned in the past by projects that went way over budget due - including hidden costs of up to 80%!
In this article, we’ll go through 8 of the most common causes of hidden costs, and how you can minimise or eliminate them in your office move project. By the end, you’ll understand how to plan and run your relocation so that you can stay within budget.
Executive Time
One of the biggest hidden costs that many companies don’t fully consider when planning their office move won’t appear on any quote. It’s the amount of time your company leaders spend on your project. This could be spent on proejct oversight, meetings, decision-making, and managing unforeseen issues.
Typically speaking, an investment as large as an office relocation will require board-level sign-off and oversight by a board member – such as the CEO, COO, or CFO. Without careful planning, this oversight could become very time-consuming. This will divert from their core role, creating issues elsewhere within your business.
To minimise the cost of executive time within your office move, appoint an experienced and capable team within your company to handle the day-to-day running of your project. You should also carefully choose your design & build company based on their project management expertise. This will free up key internal staff to focus on running your business, minimising the disruption of your project.
Staff Productivity
Another key cost that will be very hard to measure is the short-term impact on staff productivity and company service levels. This is a key factor to consider both during the move itself and as your company settles into the new space.
As your staff wind down in the old office and settle into the new one, there could be a damaging short-term performance gap. If you encounter technical or logistical issues with relocating and recommissioning equipment, this could be even longer. Prolonged downtime could lead to a major disruption to company operations. This will damage profitability and client satisfaction.
You can minimise the risk of this hidden cost impacting your project by working with your design & build company to create a detailed relocation plan. This shoud focus on eliminating downtime and disruption. Good communication between all stakeholders is crucial.
Regulation Compliance
Yet another hidden cost that could impact your office move is the compliance of your workspace. Your new space may require work to bring it in line with modern health & safety standards as well as accessibility regulations. This is much more likely to impact you if you are buying a building rather than leasing a space.
Older buildings are especially likely to need extensive updates. New layouts will be subject to more modern and stringent regulations. If your office is not compliant with modern building regulations, it will likely invalidate your insurance. It could also lead to fines and project delays.
We recommend that you engage a third-party surveyor to carry out a full building audit before you sign the lease agreement. This will enable you to identify any issues and budget for remedial works. You should also ensure that your design and build partner understands the relevant regulations and has the necessary checks in place to ensure compliance.
Utilities Systems
One of the most frustrating hidden costs that companies encounter is unplanned works to the pre-existing utilities. Systems such as air conditioning, power, and plumbing are all included within the space, and assessing their state could be missed. You then risk discovering mid-project that you need to upgrade or repair these systems for compliance or quality reasons.
If you plan to lease an older building, you are especially likely to encounter this. Likewise, if the space has been poorly maintained, the systems could have serious issues. Left unaddressed, these issues could lead to frequent breakdowns, higher energy costs, and an uncomfortable working environment for your people.
Again, a full survey by a fully qualified independent professional is essential before signing the lease. This will minimise the risk of encountering such hidden issues mid-project, which would lead to delays as well as extra costs.
Workmanship
Another factor that could increase the hidden costs of your project is the quality of workmanship. If this is not up to the necessary standard, it will need to be corrected, leading to delays. Even if undetected, it will require repair work sooner, increasing the running costs of your workspace.
Faced with time or cost pressures, some contractors may despecify or rush work. This will increase the risk of quality issues that require expensive rework. This is especially likely if you run a very competitive tender process, or cost-cut excessively. A poor-quality finish will also hurt the look and function of your new space, reducing the impact.
To prevent the risk of poor workmanship, ensure that your chosen design & build partner has thorough contractor vetting and quality control processes. You should also speak to their previous clients to ascertain the quality of workmanship.
Variations
One of the biggest causes of additional office fit out costs are contract variations. These are additions or changes to the project scope after the contract is signed. As these were not included in the contract, they will be chargeable.
Most commonly, they are due to upgrades in the FF&E package (fixtures, furniture and equipment). Another cause is due to not getting approval from the necessary internal team members. Each change not only increases costs but leads to delays.
Office relocations are complex projects, so it is almost certain you will need variations after the contract is signed. However, you can minimise them by planning carefully with your design & build company and carefully checking the scope before the contract. You should also allow a contingency of ~10% for unforeseen changes.
Withheld Costs
The most damaging form of hidden costs in your office relocation are withheld costs. Withheld costs are necessary parts of the project scope deliberately omitted by contractors from their quote, and then given to you later as a chargeable variation.
This isn’t always an issue, but if you use an unreputable company or put a company under severe cost pressure, they may sort to this to win the project. Hidden costs can become very frustrating for you, as well as increasing costs and delaying completion. In one case, we heard of a company that had suffered a cost overrun of over 80% due to hidden costs!
To eliminate the risk of hidden costs, request a detailed scope of works before signing the contract. Ensure this contains everything you need, as well as cross-referencing it to the design package, before signing the contract. You should also use a fixed-cost contract to transfer responsibility to the contractor.
Dilapidations
The final hidden cost of moving office that often catches companies out is the dilapidation costs of their old office. Most lease agreements stipulate that the office must be left in the state it was leased.
If your lease agreement contains such a clause, you will have to strip out all partitions, systems adaptions, and FF&E. This can be a significant cost - about 20% of the original fit out. This can hit you unexpectedly toward the end of your project, creating a major cost overrun.
To ensure that this cost does not hit you unexpectedly, review your lease contract early, and budget for this expense. It is also worth noting that landlords are often willing to negotiate a waiver of such a clause in return for a lump-sum payment, which is often cost-effective.
Minimising Your Office Move Hidden Costs
Moving your company from one office to another is a huge investment. You have the fit out of the new space, and the move itself to consider, as well as the transition period and management time to allow for.
Hidden costs can send your office move way over budget. This would turn your dream workspace into a costly, time-consuming nightmare. By identifying and controlling for common pitfalls—like variations, management time, and withheld costs—you can keep your project within budget and avoid delays. As a result, your project will be cheaper, less stressful, and less disruptive.
Ready to take the next step? Download your Ultimate Office Relocation Guide. It’s one comprehensive guide that will help you understand everything that goes into your office relocation, what it will cost you, and how long it will take.
To learn more about office relocation management, read Office Relocation Costs 2024, London Office Relocation Dos and Don'ts, and How to Make Your Office Relocation Less Stressful.
