Modern Workplace Planning: Solving for Experience Part VII: Design and Construction

One common mistake tenants and their advisors make when negotiating the office lease is failure to properly account for design and construction implications.  These are important considerations.  Space design plays a vital role in determining the efficacy of the space, how it translates in terms of value to the employees.  Construction is expensive, representing a material component of the tenant’s total occupancy cost.  Gaining understanding about design and construction at the right time in the transaction process provides useful data in the context of effective negotiations.
 
Design should begin once the purpose of the physical space has been determined (Part I).  The design steps are sequential.  Programming, then schematic design, followed by design development and finishing with construction drawings.  The purpose of the space informs design.  Today, purpose has been steadily shifting away from the provision of one-to-one physical spaces for employees to work, especially in hybrid or remote-first workplaces where a lot of the work is done from other places (e.g., home).  Instead, the physical space is increasingly about facilitating the types of interactions that can’t be accomplished as well through technology.  These include mentoring, collaborative teamwork, and culture-building activities. 
 
Programming is where the designer focuses on the ways in which the space will be utilized, breaking the use into groups, and detailing how many people the occupier seeks to accommodate by group, and which groups need to be next to each other.  The program is used for test fit plans with prospective buildings. The test fit is an important step in which each building under consideration is studied to see how well the floor plate accommodates the program. Floor plates vary not just by size, but also in terms of where the core is located (e.g., center vs. side core).  The best fit will result in a need for less space and provide the best flow. 
 
Next, the design phase advances with the top choice building(s) to schematic design. Here, the basic layout (wall configuration) is planned.  This phase often requires multiple rounds and discussion.
 
Design development is where detail is added to the schematic design.   These details include finishes for walls and floors, lighting, electrical needs, and reflected ceiling.  Advancing the plan to this level early enough allows us to gain valuable perspective on the cost to build.  Absent an understanding of the potential cost to build, tenants are forced to negotiate blindly, often settling for a tenant improvement allowance from the landlord, which is lower than the cost to build, leaving them exposed to a potentially large capital spend.  You can’t effectively negotiate for maximum value when you’re missing key information.
 
Alongside the advancement of the design, a good tenant process will include engagement with construction professionals who can illuminate the cost implications of the design and provide ongoing counsel regarding schedule.  Here, again, tenants often fail to timely engage construction professionals resulting in added project cost as they contend with expensive holdover scenarios and/or overtime costs to accelerate the completion of construction.  Construction consideration should be introduced to the project schedule from day one, meaning the schedule should be built backwards from the target occupancy date, giving appropriate time for development of construction drawings (the last phase of design), contractor bidding, contractor selection, permits, and construction.  These late-stage elements of the project are expensive and difficult to compress.  The timeline for strategic market engagement should thus be established sufficiently early to protect the later stages of the project.
 
The most important thing to know about modern workplace planning is that it requires full scope expertise, a team of professionals whose input is orchestrated in the right sequence to maximize value.  Among the key roles of the real estate advisor is to play quarterback in helping select, properly sequence, and engage this team.  The best tenant advisors have a holistic perspective that includes expertise and experience in all facets of the project.