Resetting TI Cost Expectations for Your Next Office Buildout

How One Bay Area Tech Company Used Design-Build to Reduce Costs by $500K+

In a traditional project delivery model, the architect is one of the first consultants to help define your project parameters. With this starting point, design becomes the primary focus. While design is critical to help your space meet organizational goals, the overall budget must be the first focus. Here is a typical example:

An architect told you it would cost between $150-$200 per square foot to build a new office space in the Bay Area, particularly San Francisco, with Union labor. You set your pro forma and go through the real estate decision-making process with this cost range in mind. After several week of design, you then take the plans out to bid.

A general contractor comes back with a bid within the $150-$200/SF range (or you go through one or several rounds of design revisions to get in that range). But is that cost per square foot etched in stone? No. This is where the real challenges begin for your project in this delivery model.

In the traditional design-bid-build process, there are many siloed parties (e.g. designer, architect, general contractor, real estate broker) working with different levels of understanding in terms of the project goals with no real incentive to move the needle in your favor. Oftentimes, the scale tips in the opposite direction both in time lost and added cost, leaving you with very few options given the time required to come to that reality.

That is why our clients love the design-build delivery model. A design-builder becomes the single point of contact taking on 100% of the risk. As a design-builder ourselves, we commit to a total project cost and schedule up front while continuing to find unique ways to deliver value.

To put this into perspective, let’s look at a recent design-build example. We had a 250-person, 28,000 SF tech office all-union buildout in San Francisco. The client was originally ensured, based on typical market costs, that a $150/SF minimum should be budgeted for the project. Through our design-build delivery model, we lowered their total cost to $133/SF.* How? Here are just two examples of design-build at work on this project: 

Light Fixtures | Saving $3.50/SF

As the design-builder for the project, we recognized the specialty fixture in the elevator lobby could be replicated by purchasing more readily available light fixtures that directly connect. This approach took material costs from $36,000 down to $16,000 and cut lead time from 10 weeks to 2 weeks.

From there, our team redesigned the lighting distribution. The original plan had linear fixtures throughout the ceiling clouds. A photometric helped determine that the exact location of the parallel light fixtures did not impact lighting requirements for workstations. By installing fixtures in-line, the lighting requirements were met, while also reducing labor costs and the number of fixtures needed. This saved the client a total of $98,000.

HVAC | Saving $4/SF

One design element for this project was creating an open office space for greater camaraderie. We looked at the preliminary HVAC zoning plans, which had a similar design to other projects in the building. Our team analyzed which zones were necessary to achieve the level of control the tenant wanted based on their operation and space utilization. Working to further define and simplify the zoning plan reduced the client’s costs by $4/SF. That is another $112,000 in additional savings direct to their bottom line.

These two examples alone accounted for $7.50/SF or $210,000 of the $500K+ in total client savings.

In the traditional design-bid-build delivery model, a general contractor skillset focuses on just the constructability of the project and the budget for design that was provided. This creates a competency gap in the project team to optimize the design to meet the budget. Value engineering is then a reactive measure to reassess the goals of the project. Our method engineered value from the beginning to ensure all project goals were met or exceeded reducing the total project cost.

By using a design-builder, budget, design, and schedule are all harmonized to maximize every aspect of the project. This ensures a project’s total cost is less, the schedule is faster, and the client is in constant control of the design. Applying these design-build principles is resetting Tenant Improvement (TI) cost expectations in the Bay Area.

*Please note: this client had a particularly high technology package inclusive of data and AV which accounted for roughly $18/SF. Other Bay Area companies might see a lower or higher cost/SF depending on any additional scope of work.

Looking for the right partner? Experience a better way to build: partnerwitharco@arcomurray.com 

See another example of the cost savings from working with a design-builder here.