There’s little doubt that the office sector is a victim of volatile times. The combination of increased vacancies, hybrid work models and flight to quality are both limiting the scope of office development, while also impacting values.

Though office fit-out activities are becoming increasingly selective, JLL’s just-released “U.S. and Canada Office Fit-Out Guide” showcases data comparing average fit-out office costs across major U.S. and Canadian markets.

In tandem with the data, JLL analysts noted that the following three trends will significantly increase office fit-out costs in 2023:

Right-sizing for the future of work

Even though employees are returning to work in person, hybrid work is still very much in play. JLL analysts point out that tenants are right-sizing their space by lowering their square footage. Even with this, costs are impacted by economies of scale. “Higher densities of technology and FF&E within the footprint result in an increased cost per square foot, which may be more aggressive than increases in total project cost,” the report noted.

Better baseline programming

Office programming includes health and wellness programming – think mothers’ rooms and yoga spaces. A higher implementation of multi-use areas also falls under this category, as does furniture that is increasingly tech compatible. In this day and age of higher employee recruitment and retention, such programs aren’t amenities as much as they’re necessities.

Perhaps unsurprisingly, the report notes that “dedicated wellness and community spaces carries a range of costs with them . . .” especially if special mechanical, electrical and plumbing are required. Additionally, supportive technology, among other items, can add to costs, while increasing “the required density of traditional working uses in a smaller footprint office,” according to the report. JLL analysts also acknowledged that the cost varies, based on the program.

Collaborative ESG implementation

Other front-and-center issues with both occupiers and owners include sustainability and wellness objectives. Net-zero carbon goals require metrics, along with effective implementation tools. Green leases are also growing. While green leasing does offer value propositions (the main one being the path to Net Zero Goals), upfront costs can be high. Still, “collaboration and careful execution can lead to significant cost and carbon savings,” the JLL analysts point out.  One recent estimate by IMB put the potential annual energy savings if all leased office buildings had green leases at $3.3 billion.