Resetting TI Cost Expectations in the Bay Area for Office Buildouts

ARCO/Murray Office Project: Tech Office Reception

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 client’s project parameters. With this starting point, design becomes the primary focus. While design is critical, as you can probably guess, the overall budget must be the first focus. Here is a typical example:

An architect told your client 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 the client using this cost range. After several week of design, your client takes the plans out to bid.

A general contractor comes back with a bid within the $150-$200/SF range (or your client goes 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 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. That is the exact reason why the CRE industry loves the design-build delivery model. The design-builder will become the single point of contact taking on 100% of the risk. As a design-builder, 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 project 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 and the schedule is streamlined, so your space will be occupied faster. 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.

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