Ingredient 4: Market Premium

November 25, 2019 • aaitken

Designers balance the goals and desires of clients against costs, schedules, and logistical challenges.

Leading organizations in their process of change is really about helping them align their expectations. Innovations centers are a large capital investment and market premium expectations to support their vision must be addressed early in the planning process. The old saying “You get what you pay for” stands true when it comes to shifting from a standard open office environment to one that supports innovation.

Let’s start with a standard office space. Most facility managers, commercial real estate brokers, or commercial contractors can spit out costing information for the build-out of a commercial office space. Many use their own experiences and history. Others utilize industry benchmark standards such as BOMA. While these resources work very well for organizations to judge costs, they really don’t know what they are getting for these benchmark numbers. What about the return on their investment? What are they getting for their money? Remember: you get what you pay for.

If increased innovation, attracting talent, and increasing speed to market is the desired return, then the standard formula for costing is of no use. There is a market premium that comes with such innovative spaces.

But why does it cost more? The short answer is that innovation centers invest greatly in their furniture and technology (FFE items). The expenses can be almost twice than that of a standard open office space. The reason for the investment is that furniture systems, access to technology, and a flexible systems infrastructure are crucial to the success of an innovation center.

BOMA costing standards state that for a class A office environment, the cost of $50.00 per square foot should be expected. This includes hard costs only (construction of walls, flooring, lighting, etc.). If FFE items (furniture, technology, etc.) are added, pricing expectations rise to $80.00 per square foot. These costs assume a standard result: acoustical ceiling systems, consistent lighting, limited HVAC control, and standard furniture system for all employees. I could go on, but you get the picture: a pretty standard office space, not one of innovation.

Our experience in creating innovation centers shows an average construction cost range of $85 – $120 per square foot. If FFE (furniture and technology) is included, the costs rise to $110 – $160 per square foot.

As mentioned previously, many of the increases in construction cost are infrastructure to support flexibility of the environment and the employees’ work process. Remember, another ingredient to crafting an innovation center is flexibility and enabling employees to report to any space to support their task, personality, and/or collaboration needs. A standard office environment is unable to address those challenges. A standard office operates under a one size fits all mentality.

Understanding the market premium that innovation centers require enables organizations to better align their expectations. Those who are truly focused on utilizing design for change, understand the investment is worth every penny and will transform their organization to better align their business for success.

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