stats Making the Business of Life Easier

   Finance globeinvestor   Careers globecareers.workopolis Subscribe to The Globe
The Globe and Mail /
Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels


  This site         Tips

  The Web Google


  Where to Find It

Breaking News
  Home Page

  Report on Business



Subscribe to The Globe

Shop at our Globe Store

Print Edition
  Front Page

  Report on Business




  Arts & Entertainment



   Headline Index

 Other Sections

  Births & Deaths






  Facts & Arguments




  Real Estate









  Food & Dining




  Online Personals

  TV Listings/News

 Specials & Series
  All Reports...


   Where to Find It
 A quick guide to what's available on the site



  Customer Service

  Help & Contact Us



 Web Site

  E-Mail Newsletters

  Free Headlines

  Globe Store New

  Help & Contact Us

  Make Us Home

  Mobile New

  Press Room

  Privacy Policy

  Terms & Conditions


Office renovation sticker shock: Getting the best bang for the budget
Companies refitting their space find ways to trim costs but still splurge on amenities
Special to The Globe and Mail

Email this article Print this article
Tuesday, April 10, 2018 – Page B6

The first sticker shock for National Public Relations came when it had to renew the 10-year lease on its office at 320 Front St. W. in downtown Toronto.

In Toronto's hot property market, the PR consultancy was looking at a 35-per-cent increase in rent. "The only choices were to move to the suburbs where rents were lower -- which wasn't an option for our young work force -- or reduce our footprint by a third," says Royal Poulin, executive vice-president and chief financial officer of National's parent company, Res Publica Consulting Group Inc.

Then came the next reality: the soaring cost of renovations for the consolidation to two floors from three floors in the same building. "With a budget of about $100 a square foot, we needed to focus on facilitating how people do their work, rather than quartz counter tops and chrome fixtures," he says.

That meant moving from 90per-cent private offices to openconcept work areas, but splurging on amenities that could increase productivity, such as technology and collaborative spaces including a café, he says.

It's a trade-off facing companies across North America as the costs of refitting offices rise faster than inflation, concludes a study by Chicago-based Jones Lang LaSalle LLP, a commercial property services company.

JLL has come up with a report to guide companies. Its Office FitOut Matrix report compares the costs of redesign, construction and furnishing expenses for existing office spaces using data from 2,800 projects in 59 U.S. and Canadian cities in 17 industries.

Toronto, Vancouver and Calgary ranked among the 10 most expensive cities to outfit an office, while seven cities in Florida were the least expensive for office remakes.

The difference in the cost of building open versus closed offices isn't as significant as the selection of materials and craftsmanship for the goals companies want to achieve, JLL's study found.

"While shifting to co-working and open collaborative spaces takes down the cost over all, it changes where the budgets are being placed -- less on the hard structure and more on equipping the space with a variety of furniture and interesting décor, and adding more technology, connectivity and collaborative spaces," says report author Mason Mularoni, research manager for JLL. With no private offices and smaller work stations, there's a need for amenities that weren't common in the past, including interactive kitchens and living-room style spaces with sofas and tables.

While the costs -- all in U.S. dollars -- can vary based on the condition of the office before renovation, the study compares what it takes to achieve different levels of quality and complexity.

For instance, in downtown Toronto (where the average asking rent is $60 a square foot, compared with a Canadian average of $17.22 a square foot), a "progressive" renovation on a tight budget will average $133 a square foot for an open floor plan with no enclosed offices, bench-style desks and some conference spaces. A "moderate" style --adding 10-per-cent enclosed offices and more collaboration enclosures -- raises the average cost to $139 a square foot. A "traditional" design -- with 30-percent enclosed offices and eightby eight-foot cubicles -- comes in at an average of about $157.

The study found the level of customization chosen affects prices more significantly. The open office with basic materials and finishes rises from $133 to $169 with superior-quality materials, lighting and decor, and goes to more than $206 with top-quality finishes and an emphasis on aesthetic details.

Over all, the cost of renovations in Canada rose an average of 4 per cent in 2017 and a big reason was labour costs because of competition for skilled workers. As demand has increased, competition is driving up hourly wages, says Nick Joosten, Canada lead for JLL project and development services in Toronto.

"There has been a real crunch in construction talent because a lot of skilled workers left the construction industry in the recession after 2008 and the amount of workers in construction today is actually lower than in 2007."

Costs for each style of renovations in 2017 were nearly identical in Toronto, Calgary and Vancouver, but a few dollars less per square foot in Montreal.

"Because major office renovations only happen once every decade or two, the rising costs of materials and labour generally come as a jolt to managers. It's particularly eye-opening for startups that are moving from basic to a more corporate look in their workplaces," says Kevin Katigbak, senior workplace strategist for the Toronto office of Gensler, a New York-based architectural and planning firm (which advised National on its remake).

A big driver of renovation is rebranding and refreshing dated offices to be able to attract tech talent in a very competitive market, he adds. "We tell clients: Ignore community spaces at your peril. They drive and inspire employees to stay with the company."

If budgets are restricted, Gensler advises clients to funnel more of the funds to shared spaces and elements that make the spaces feel uniquely branded, Mr. Katigbak says. "We find that single-use spaces are very much a thing of the past, and kitchens and communal spaces that can be meeting spaces outside of lunch hours are absolutely essential. Investing in making them attractive as well as functional with proper data and power support for equipment is money well spent."

That's what National did in Toronto for its new space on the upper floors at 320 Front St. W., a mid-rise glass tower owned by H&R REIT. A committee of employees from all departments advised in planning meetings and tested a range of furniture that was within the budget. "A good coffee area was one area we splurged on because the coffee in the old space was terrible," Mr.

Poulin says. A welcomed amenity is a series of privacy booths divided by soundproofed glass, with monitors where employees can plug their computers and phones.

Meticulous planning kept costs in line, Mr. Poulin says. National started planning its renovation a year and a half in advance of starting work.

"We were able to gain efficiencies in our budget because we had multiple bidders for everything and didn't make changes while the construction was going on. We planned all the details --from where the electrical outlets are to what height the TVs will be installed. When you don't have the luxury of time to plan, you should expect to pay a lot more."



Downtown will continue to have more demand than supply for larger downtown office spaces until at least 2020, with gross rates in the financial core hitting as much as $70 a square foot, according to statistics gathered by JLL. Despite that, vacancy rates are rising in Toronto's suburbs as companies there downsize or look to relocate downtown.

VANCOUVER Rents will continue to climb as companies continue to grow and relocate. A limited supply of quality contiguous space is predicted to continue until new office projects come online in 2021.

MONTREAL Despite much stronger activity in recent quarters, Montreal is unlikely to experience much growth in the coming year as the market still has a relatively high level of availability in existing inventory.

OTTAWA A federal exodus from the downtown market is expected to leave several hundred thousand square feet of supply looking for new tenants in the next 24 months.

EDMONTON A continuing recovery in Alberta's economy is expected to result in a slight increase in office demand, but Edmonton remains a tenants' market this year with vacancy rates experiencing little change.

CALGARY At least two quarters of negative rental activity are predicted, unless there is a surge in the price of oil. Meanwhile, the energy industry may still see more merger and acquisition activity through 2018, potentially putting even more space on the sublease market.

SOURCE: JLL PROPERTY METRICS 17.2% Biggest one-week gainer among REITS: Pure Multi-Family 15.5% Biggest one-week gainer among real estate operating companies: Temple Hotels 2.6% Biggest one-week decliner among REITS: European Commercial 5.9% Biggest one-week decliner among real estate opearting companies: StorageVault Canada CIBC

Associated Graphic

When National Public Relations renovated its Toronto office, it downsized to two floors from three and chose an open-concept floor plan that emphasizes community spaces.


Huh? How did I get here?
Return to Main John_MacLachlan_Gray Page
Subscribe to
The Globe and Mail

Email this article Print this article

space  Advertisement

Need CPR for your RSP? Check your portfolio’s pulse and lower yours by improving the overall health of your investments. Click here.


7-Day Site Search

Breaking News

Today's Weather


Rick Salutin
Merrily marching
off to war
Roy MacGregor
Duct tape might hold
when panic strikes

Where Manley is going with his first budget



For a columnist's most recent stories, click on their name below.


Roy MacGregor arrow
This Country
Jeffrey Simpson arrow
The Nation
Margaret Wente arrow
Hugh Winsor  arrow
The Power Game

Rob Carrick arrow
Personal Finance
Drew Fagan arrow
The Big Picture
Mathew Ingram arrow
Brent Jang arrow
Business West
Brian Milner arrow
Taking Stock
Eric Reguly arrow
To The Point
Andrew Willis arrow

Stephen Brunt arrow
The Game
Eric Duhatschek arrow
Allan Maki arrow
William Houston arrow
Truth & Rumours
Lorne Rubenstein arrow
 The Arts

John Doyle arrow
John MacLachlan Gray arrow
Gray's Anatomy
David Macfarlane arrow
Cheap Seats
Johanna Schneller arrow

Murray Campbell arrow
Ontario Politics
Lysiane Gagnon arrow
Inside Quebec
Marcus Gee arrow
The World
William Johnson arrow
Pit Bill
Paul Knox arrow
Heather Mallick arrow
As If
Leah McLaren arrow
Generation Why
Rex Murphy arrow
Japes of Wrath
Rick Salutin arrow
On The Other Hand
Paul Sullivan arrow
The West
William Thorsell arrow

Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels

© 2003 Bell Globemedia Interactive Inc. All Rights Reserved.
Help & Contact Us | Back to the top of this page