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Market overview

Contractors' order books are filling fast, which has led to a more selective approach to tendering. The preferred route is a two-stage tender for fit-outs worth more than £10m to limit contractors' costs and tendering expenses.

Thanks to an often excessive workload, the mark-ups for fit-out contractors remain low at 0.5% to 2%.

Even in a busy market, though, there can be casualties - fit-out group Curzon Holdings recently went into receivership.

In short, fit-out contractors can pick and choose projects, and are avoiding tendering for anything that does not fit in with their current work portfolio.

Sheppard Robson’s design for the Salvation Army’s office in central London

Hot topics

Revised Part L

The government has just introduced the final version of the revised Part L of the ºÚ¶´ÉçÇø Regulations. The new rules increase energy efficiency requirements as well as introducing mandatory air pressure testing for new buildings. However, Part L will probably not affect fit-out budgets, as the cost of compliance would be dealt with during the base-build phase.

BREEAM ratings

Many clients are becoming more aware of the BREEAM rating system for green buildings and some are enthusiastically chasing "very good" or "excellent" ratings.

Although this means contractors should take care with the fit-out, particularly in areas such as lighting design and daylight control, the costs of achieving a BREEAM rating would be largely met by the developer. Tenants are becoming more attracted to buildings with good BREEAM ratings, so the developer must meet BREEAM criteria to boost their chances of letting the building to a quality long-term tenant.

Inflation and Category A fit-outs

Some developers make contributions to the cost of Category A fit-outs being carried out by tenants. These contributions are typically £35-38/ft2. Tenants should ensure that any contribution is index-linked to inflation at the time when fit-out work starts.

Lead times for London office fit-outs

Small office: 50,000 ft2

• Design: three months
• Procurement: two months
• Start on site: one month
• Build: three months

• Design: three months
• Procurement: two months
• Start on site: one month
• Build: four months

• Design: nine months
• Procurement: three months
• Start on site: one month
• Build: nine months

Costs

The following issues affect the cost of office fit-outs:

• Proportion of individual offices and open plan
• Proporion of higher-cost areas such as meeting rooms, dining areas, restaurants, gyms and auditoriums
• Amount of works to base building installation, for example, extent of reception areas, quality of common areas and so on
• Carrying out work when the building is occupied
• Churn, in regard to demountable partitions and the flexibility of space
• Dealer floors and associated IT, high-cost items that significantly increase the overall fit-out costs

Arup’s office in London, also designed by Sheppard Robson