LEASEHOLD IMPROVEMENTS AND CONSTRUCTION COSTS IN TODAYS MARKET: - PowerPoint PPT Presentation

LEASEHOLD IMPROVEMENTS AND CONSTRUCTION COSTS IN TODAY’S MARKET: Current Issues and Management Challenges in a Greening Market

Today’s Discussion • Market Influences •Being Ready on Time • Managing Construction Costs • Delivery Dates • Penalties

Market Influences Rising Costs • Leasing Costs - Less multi-floor contiguous space - Base Building: rising taxes and fuel costs - higher density space - Extreme growth - Staff attraction and retention - Construction costs remain at 2007 levels • Technology change every 6 months – i.e. wireless • Churn rates 100% • Reduced credit = volatile marketplace

Building Search / Feasibility Planning • The more lead time you have the better the costs and schedule are controlled • Preliminary space planning, often of several buildings • Schedule: - 10,000 sq. ft. requires approximately 4 days for planning - 20,000 sq. ft. requires approximately 1 to 1 ½ weeks for planning - 60,000 sq. ft. requires approximately 1 ½ weeks for planning - 120,000 sq. ft. requires approximately 2 weeks for planning • LEED Certified buildings – LEED CI Commercial Interiors Managing Construction Costs Delivery Dates Being Ready on Time

Building Search / Feasibility Planning High Level Generic Preliminary Budget Pricing • Existing Buildings - Level of existing finishes and architectural detailing have a significant affect on the bottom line - 13,000 sq. ft. comparison is $60,000 different • New Buildings - Building Efficiency: Building A - 127,000 sq. ft. Building B - 147,000 sq. ft. Being Ready on Time Managing Construction Costs Delivery Dates

Programming Base Building Delivery • New buildings under construction: - no elevators: schedule extension higher costs access to complete space - loading dock not accessible - base building occupancy permit - no phone service - no air conditioning or cannot be balanced Managing Construction Costs Delivery Dates Being Ready on Time

Programming • Construction Managers - Experience in buildings you are considering - Over 15 years in the Calgary marketplace; loyalty from the subtrades - Has experience with LEED projects • Landlord work to be completed by the Landlord - Incorporate electrical and mechanical systems and interconnecting stair openings based on a Tenant’s plan layout = significant savings in construction costs Managing Construction Costs Delivery Dates Being Ready on Time

Detailed Planning • Identify types of planning expectations • Open planning is typically less construction cost • Schedule: - 10,000 sq. ft. requires approximately 2 weeks for planning - 20,000 sq. ft. requires approximately 3 weeks for planning - 60,000 sq. ft. requires approximately 4 weeks for planning - 120,000 sq. ft. requires approximately 5 weeks for planning Being Ready on Time Managing Construction Costs Delivery Dates

Modular Planning • Modular planning = future flexibility = lower renovation / reconfiguration costs Law Firm, Downtown Calgary Being Ready on Time Managing Construction Costs Delivery Dates

Design Development Sustainability • Materials should be analyzed for their lifecycle, not just initial cost • Materials need to be: - durable over a long period of time - made from recycled material - recyclable - reused on site - designs need to use less new materials = reduced cost • Professional fees on a 127,000 sq. ft. project = $1.00 sq. ft. for interior design fees Most Sustainable Materials have little or NO cost increase Being Ready on Time Managing Construction Costs Delivery Dates

Design Development • Pre-ordering of long delivery items • Schedule: - 10,000 sq. ft. project start 6 to 8 months prior to move-in - 20,000 sq. ft. project start 9 months prior to move-in - 60,000 sq. ft. project start 1 year prior to move-in - 120,000 sq. ft. project start 2 years prior to move-in Being Ready on Time Managing Construction Costs Delivery Dates

Design Development • Shortage of materials: - drywall vs. moveable wall systems - less credit = manufacturers carry less inventory = longer delivery time - less credit = risk of manufacturer closing, plan B and C alternative materials • Shortage of labour: - millwork – 6 weeks manufacturing time - modular kitchens - less time to manufacture - systems furniture instead of millwork – less time and less expensive - modular walls, doors, hardware and glass are being used for wall construction or office fronts to reduce costs and installation time Being Ready on Time Managing Construction Costs Delivery Dates

Contract Documentation / Working Drawings • Construction employees in training • The tighter the drawings, the more controlled the cost of construction • Schedule: - 10,000 sq. ft. requires approximately 3 weeks for Working Drawings - 20,000 sq. ft. requires approximately 3 weeks for Working Drawings - 60,000 sq. ft. requires approximately 4 weeks for Working Drawings - 120,000 sq. ft. requires approximately 8 to 10 weeks for Working Drawings Being Ready on Time Managing Construction Costs Delivery Dates

Building Permits • Process ranges from 5 to 7 weeks • If no permit is posted, the job site can be shut down, resulting in the schedule being compromised • Fines add cost to the project Managing Construction Costs Delivery Dates Being Ready on Time

Tender / Final Pricing In the Calgary marketplace, we recommend: • Working with construction managers to ensure quality, cost control and meeting of schedules • Using the industry standard stipulated price CCDC 2 2008 contract Being Ready on Time Managing Construction Costs Delivery Dates

Tender / Final Pricing Cost per square foot in the Calgary marketplace: New Construction Basic space: $80.00 per sq. ft. Being Ready on Time Managing Construction Costs Delivery Dates

Tender / Final Pricing Cost per square foot in the Calgary marketplace: New Construction More typical: $100.00 to $120.00 per sq. ft. Being Ready on Time Managing Construction Costs Delivery Dates

Tender / Final Pricing Cost per square foot in the Calgary marketplace: New Construction High-end: up to $200.00 per sq. ft. Being Ready on Time Managing Construction Costs Delivery Dates

Tender / Final Pricing Cost per square foot in the Calgary marketplace: Renovation Depending on the quality of the existing space, pricing can range from $40.00 per sq. ft. to $80.00 per sq. ft. Being Ready on Time Managing Construction Costs Delivery Dates

Construction / Field Review • Schedule: New Construction - 10,000 sq. ft. one floor – 8 to 10 weeks - 20,000 sq. ft. one floor – ranging from 10 to 12 weeks - 60,000 sq. ft. three floors – 16 to 20 weeks - 120,000 sq. ft. – 8 to 10 months depending on the extent of architectural detailing Renovations - Similar to new full floor construction depending on the extent of the work - Up to 30% more time required if the space is occupied Managing Construction Costs Delivery Dates Being Ready on Time

Contract Administration / Cost Control • Get everything in writing! • Document daily materials being shipped, stored in warehouses delivered to site and installed on site • Penalties / Bonuses • Furniture Installation: - 10,000 sq. ft. one floor – 3 to 4 days - 20,000 sq. ft. one floor – ranging from 5 to 7 days - 60,000 sq. ft. three floors – 3 weeks - 120,000 sq. ft. – 6 weeks depending on the extent of systems furniture Being Ready on Time Managing Construction Costs Delivery Dates

Project Closeout • Follow instructions in maintenance manuals to ensure the warranty does not become void • Establish yearly service agreement for equipment. i.e., air conditioners • One-year warranty walkthrough Being Ready on Time Managing Construction Costs Delivery Dates

Schedule Summary • Lease Negotiations / Design Process through to Furniture Installation - 10,000 sq. ft. project approximately 3 to 4 months to complete - 20,000 sq. ft. project approximately 6 to 7 months to complete - 60,000 sq. ft. project approximately 7 to 8 months to complete - 120,000 sq. ft. project approximately 1 year to 1.5 years to complete Managing Construction Costs Delivery Dates Being Ready on Time

Benefits of Using an Interior Design Consultant • Cost control and savings • Market knowledge / benchmarking / future trends • Experience and strength in accurate scheduling • Have long-term relationships with Construction Managers and subtrades • Client can focus on their core business

SHAPING THE WAY YOU WORK ONE SQUARE FOOT AT A TIME DISCUSSION