Whether moving to new premises or staying put and upgrading existing space, fit-out costs and delivery can be a hurdle, particularly in the current economic and regulatory climate.

However, with employee satisfaction and productivity driving business owners to look at the working environment as an attraction-retention tool across sectors, and with hybrid work models remaining in play for the office market, landlords and occupiers are engaging in mutually beneficial negotiations around fit-out.

Just how these conversations play out is dependent on many factors and we’re seeing some innovative and accommodating lease structures that allow all parties to get down to business.

Taking an end-to-end approach, Platform Group provides independent project advisory for a wide range of clients and specialises in commercial office, workplace design and independent project/cost management services.

Platform’s commercial manager, Tim Ray, says the fit-out market has remained stable demand-wise over the past year, both for tenants opting for new fit-outs in a different location or those upgrading existing spaces to enhance functionality and aesthetics.

“We’ve noticed landlords becoming more proactive in attracting tenants by offering spaces that are ready to occupy, or by contributing to the design and fit-out of the space.

“With a growing emphasis on adaptable workspaces, reflecting a broader trend towards hybrid working models, clients are looking to incorporate flexible workstations, collaborative areas, and features that promote employee well-being.”

Ray says material costs and labour rates from all trades have fluctuated over the last 12 months.

“More recently we’ve seen a reduction in labour costs and, as designers and clients have more choice now across standard and premium materials, there’s been greater pressure to reduce material costs.

“The average overall square metre cost range has remained constant, but due to many businesses scaling down the space they require through hybrid and flexitime working models, the overall expenditure on fit-out has reduced.”

Cost overruns remain a risk in any fit-out process, but Ray says there are ways to avoid budget blowouts.

“At Platform, we start with a comprehensive detailed budget estimate that includes contingencies for design development.

“Then during the design phase, we run additional budget updates to ensure the design is reflecting the client’s CapEx budget. Platform will then enter into a fixed-price contract with clients to lock in costs and reduce the risk of surprises.”

One element of the fit-out programme that is less controllable is the compliance and regulatory process.

“Programme and timing delays are common at the moment, mainly due to council consent processes which currently seem to be taking 30 – 40 days on a fit-out and longer on any building that is older and not to current code.

“The key is to gather as much relevant information in the early stages of the programme and book a pre-application meeting with the council to review and discuss any potential issues ahead of time.”

In the retail sector, Bayleys national director retail, Chris Beasleigh, says there’s no one-size-fits-all solution when it comes to fit-out.

“Food and beverage and grab ‘n go operators are looking for properties that are fully or partially fitted out, so they can utilise some or all of that fit-out – for example, extraction, kitchen, and bathroom facilities that are costly to install from scratch,” explains Beasleigh.

“New retail operators that do not have the budget for bespoke fit-out are also looking to utilise some components of an existing fit-out.

“If the property is just a shell, we advise tenants to seek advice from a fit-out consultant so they understand the full cost and the timelines, including how long a building consent will take to be approved.”

Beasleigh says larger retailers and big brands tend to have their own property and fit-out teams, are well-versed in processes and timelines, and generally prefer a bare shell to work with as given their scale and resources, it’s more efficient to do a custom fit-out than to work with any existing installation.

By nature, industrial property tends to be more utilitarian and less focused on aesthetics. Bayleys national director industrial and logistics, Scott Campbell, says while racking and office infrastructure is becoming a negotiable point in many existing buildings, simple fit-out is generally the responsibility of the incoming occupier.

“Naturally, with some of the sophisticated industrial new-builds we’re seeing, fit-out is a big deal and a big expense. For larger manufacturing and industrial processing occupiers, fit-out is usually tendered for separately, but managed by the main building contractor for timeline and practical purposes and efficiencies.”

Bayleys national director office leasing, Matt Lamb says many occupiers want turn-key, fully-fitted office space and this is a practical and cost-effective solution for landlords and tenants.

“The cost of fit-out to an occupier is really driving demand for plug-and-play space that is walk-in ready, fully kitted-out and seamlessly transferrable to a new tenant.

“With significant amounts of sub-lease space coming to the market, and with landlords keen to do deals, occupiers will be able to secure well-located, good quality space with existing fit-out and avoid upfront capital outlay.”