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The shift in expectations of how, when and where we use the office has led business leaders to give greater focus to their office space requirements.

Ensuring that the workplace remains fit-for-purpose has given many the impetus look at office design, however the costs of delivering such projects are being impacted by inflationary pressures, and as we head into 2022 the picture does not look any rosier, so what should tenants expect?

PRICE HIKES IN 2021

Throughout last year construction costs have increased steadily month-on-month across all materials, with the greatest rises seen in steel, timber, and concrete, with the Office for National Statistics recording a combined increase of 24.5% increase from October 2020 to October 2021. A significant rise in demand has largely driven up costs with import demand of constructions materials rising by 10.7% from Q2 2021 to Q3 2021 alone. Coupled with ongoing manufacturing capacity issues both domestic and overseas as a result of the pandemic overall project costs have been adjusted accordingly.

It is not just the base build costs that have been impacted, furniture suppliers have increased their prices between 7-12% across their portfolio of products. Whilst raw materials have increased, supply chain issues stemming from Brexit regulatory change has meant that firms can no longer operate at a loss.

To further compound pricing issues, labour costs have also increased, fuelling the upward direction of project costings. The culmination of all these factors come at a time when business expenditure in general comes under significant scrutiny.

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COST PRESSURES REMAIN IN 2022

The exponential increase in costs seen throughout last year look likely to start levelling off. However, prices on average will be higher than in 2021 and whilst we do not rule out any further increases in 2022, it is highly unlikely that prices will drop.

What the past few years has taught us is to expect the unexpected and therefore we are cognisant that several factors remain in play that could impact the timeframe of project delivery and/or costs. One such factor is the continuation of delays at the border because of tighter custom controls, whilst not necessarily inflating material costs, the change in timings eventually filtering through to the bottom line.

Unfortunately, for our clients, these cost increases do all filter down to them and are felt in the overall project cost. Whilst our designers and project managers are tasked with keeping within allocated budgets, we are acutely aware that on occasions, events beyond our control can impact costs.

However, it is not all bad news for tenants, the impact of the pandemic on leasing has led to a significant volume of office space remaining available. Landlords, in a bid to differentiate their offering from the competition, are delivering fit outs on behalf of the tenant, thereby providing savings on capital expenditure. This will lead to reduced incentives of rent-free periods, and a higher rent, but it could save significant upfront construction costs.

With Dthree by your side from day one, processes are streamlined, budgets are safeguarded, and your employees get the office they deserve. So, dream big, and we will take care of the rest.

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