What is the Cost to Open a Business Office?

In late April, Telsec Business Centres posted How to Create a Great Place to Work on our "Small Business Blog" and after several requests to go deeper into the subject we decided that Canada One's small business audience would be the perfect place to do so. Today we are going to explore the costs of opening a traditional and/or alternative office space – including how to calculate the needs and requirements for your perfect workplace and meet the constantly changing expectations of your employees regarding their workspace.

In essence, the question "How do I Create a Great Place to Work?" comes down to providing enough workspace along with with good support space and services in an environment that is conducive to making your employees comfortable and more productive.

Support space that facilitates better collaboration between project members, telecommuting and shared space are new trends that are changing office-space design and consequently the square footage needs of many businesses. The shared, team and co-working trends aren't just found in the technology industries! Alternative office space is a trend that many businesses are embracing because it improves productivity and often lowers costs as workspace is used more efficiently.

How do you Create a Great Place to Work?

Creating a great place to work is not as complicated as it seems. The best workplaces are the result of a well-thought-out strategy that considers the amount of private, shared and support space needed to provide the best environment for employee productivity to thrive, while using the office space effectively and efficiently. This creates an environment that improves employee morale, productivity and enjoyment of the workplace.

Once you understand the office-space and support-space requirements for different types of workers, calculating your "real estate" or square footage requirements is easily determined by the number of employees and support space you need. Once you have determined how many employees you will have and what kind of workplace they require, the task to calculate your office costs becomes much simpler because all you really need to determine is the number of employees and what types of office space they require.

Considerations for Workspace Requirements

From the U.S. Government study: Workspace Utilization Benchmark July 2012
When determining the best way to forecast and allocate workspace and support knowledge workers, today’s architects, designers, facilities and real estate professionals, and workplace consultants must consider the following factors:

• Space availability
• Energy costs
• Operation and maintenance costs
• Ever-changing mission requirements
• Security concerns
• Emergency management planning
• Alternative workplace arrangements (AWA) and the new mobile workforce.

The above quote from the U.S. government’s office-space study provides a few of the considerations you need to address in order to create a great workplace.

Space Availability

One of the considerations of space availability is where you want to be located. Are there advantages to being located near industry architecture? For instance, an office near a courthouse for a lawyer? I know a business that at times has problems finding qualified people because it chose to locate offices in a Toronto suburb, thus making for a long commute for employees living in downtown Toronto.

Energy and Maintenance Costs

Many people renting a traditional office space fail to realize that on top of the cost per square foot, there are often further charges for utilities and maintenance on top of the rental costs. To calculate the cost of utilities, you may find the ConED.com_business Calculator helpful.

Maintenance and operations are a little tougher to calculate before-hand, as these costs would be affected by the age of the building, location and other factors. So be sure to ask or read the contract thoroughly so you understand your responsibilities and obligations. A business centre or an alternative office-space provider often does not apply these extra charges – which can result in substantial savings.

Security Concerns

A government agency would have far more concerns about security and emergency planning than most businesses would because of confidentiality concerns about the business it conducts. A small business likely has far less concerns about security because the expectations of its clients and the nature of the business is often less confidential than the business of a government agency.

Emergency Management Planning

Emergency management planning is geared more towards government agencies because of people’s expectations that a government agency should always be capable of serving their needs. Private businesses should also have plans for disaster recovery. However, the public’s expectations are much lower. If your business location was to become unusable, have you planned how you will overcome that emergency?

One benefit of a business centre or alternative office-space provider is that, since it provides these services, it is a lot less likely to be affected by events that cause emergencies – since they must be prepared for emergencies because they are providing disaster recovery services to other businesses.

What are Alternative Workplace Arrangements?

An alternative workplace arrangement is one that takes advantage of an improving mobile workforce and greater use of instantaneous wireless to create more effective use of office space (by creating team space, co-working, shared work spaces and telecommuting to improve morale among employees and to reduce office-space costs).

Another example is where an employee may have a smaller personal work area with a shared workspace for collaboration among project members. Another new trend is telecommuting, where an employee may work from home and have less private space or lessa shared space in the office.

- In January 2012, eWeek reported that, according to an updated forecast from IT Analytics firm IDC, the world’s mobile worker population will reach 1.3 billon, representing 37.2 percent of the total world workforce. - In the America’s region (United States, Canada & Latin America) the number of mobile workers will grow from 182.5 million in 2010 to 212.1 million in 2015. - North America has the largest number of mobile workers in the America’s region with 75% of the workforce being mobile in 2010.

Above from GSA:Workspace_Utilization_Benchmark_July_2012

Calculating the Costs of Your Business Office Space

There are 3 components that make up the cost of your workspace:

1. Real estate (sq. ft.)
2. Furniture
3. Business Equipment

Real Estate

The real estate component includes all the costs associated with the rental of your office space that may include a charge per square foot plus utilities and more (sometimes even including municipal tax). If you are in the discovery phase, we suggest searching on Google using “Your City average office space cost.” In Toronto it is X. For the purposes of this post we are going to assume the average price is the “all in” price of office space in the location.

As reported by CoreNet, the average for all companies surveyed has found that square feet per worker in 2017 will likely average around 151 square feet as opposed to 175 square feet today – and 236 square feet in 2010. Below are some suggestions for square footage for a variety of employees and support areas such as conference rooms, mailrooms etc. Note that adjustments should be made based on your use of alternative and shared or team office space.

Below data from: http://operationstech.about.com/od/startinganoffice/a/OffSpaceCalc.htm

Employees Requiring Offices

• President (400 sq. ft.)
• Vice Presidents (200 sq. ft.)
• Managers (150 sq. ft.)

Employees Requiring Cubicles

• Secretaries (125 sq. ft.)
• Customer Service Reps (125 sq. ft.)
• Accountants (150 sq. ft.)
• Programmers (125 sq. ft.)
• Engineers (175 sq. ft.)

Employees Open Area

• Data Entry (125 sq. ft.)
• Clerks (125 sq. ft.)
• Temporary Employees (100 sq. ft.)

Other Office Area Requirements

• Reception Area (100 sq. ft. + 10 sq. ft. per person waiting)
• Conference Room (50 sq. ft. + 25 sq. ft. per person seated)
• Mail Room (125 sq. ft.)
• Work Room (125 sq. ft.)
• File Room (200 sq. ft.)
• Storage Room or Library (200 sq. ft.)
• Lunch/Break Room (75 sq. ft. + 25 sq. ft. per person seated)

There are also several case studies in the GSA:Workspace_Utilization_Benchmark_July_2012 that provide a variety of examples of space allotment from private and public organizations. Often, when business owners calculate their needs they forget to add space for “other office areas” that provide support space outside of the employees space.

Calculating the Real Estate Costs

According to the Toronto Real Estate Board, the average GTA office lease rate was up by 2.8 per cent to $12.64 in the first quarter of 2015. For other cities, this information is often collected and shared by their local Real Estate Boards. Often, these costs can be found with a search of Google using [your-city avg. cost of office space per square foot 2015].

that you have some examples of workspace requirements for different jobs, you can calculate the real estate or office space required. Add the square footage required for different jobs, the office space you require for reception, and other support workspaces (which may depend on the number of files and other spaces such as a lunch/breakroom facilities), shared space for team collaboration etc., and boardroom or meeting rooms. To calculate the real estate component of your office space costs, you multiply your square footage calculation by the cost for average office space in your city.

Calculating Office Furniture Costs

There are many resources and references that detail how to calculate the costs of office furniture. One method is to calculate the costs based on employees, and the second is to determine furniture cost based on the square footage of the office. That was the best I could do as far as finding any way to calculate these costs without first choosing what you wanted and pricing it out.

Since these calculations are for budgeting purposes, I have gone on the assumption that the information is accurate enough for our purposes. Our research found that the following were commonly used for the purposes of calculating office furniture needs for your small business:

1. $1,000 - $5,000 per person
2. $10 - $30 per square foot

*Source: BFI online.com ~ What does furniture cost?

Calculating Business Equipment Costs

There is no way to calculate these costs other than to follow the lead on this page that lists the bare minimum of what you should provide to end up with the great workplace we are trying to create. The following should be priced – and professionals sought – to be sure the equipment you purchase will meet your needs and requirements.

1. Business telephone system
2. Computers and software
3. Computer network and connection
4. Multifunction printer
5. Cell phone - PDA
6. Shredder
7. Mailing equipment

*Source: About.com: From this page you can find pointers to pages that provide helpful information about what your needs will be now and in the future. Note that the above information may be a little old, as mailing equipment and a shredder were likely used much more before business records started to be kept in digital formats. Having said that, many business do keep back-up, hard-copy files.

Conclusions for “What is the cost to open a business office?”

Calculating the cost of opening an office may seem overwhelming at first. It is our hope that this post will help you get past that and help you to take the next step forward – now that we’ve provided you with all you need to calculate the costs for a traditional office space location with alternative office space usage. One of the big advantages of business centres is that most of the support spaces like breakout rooms and boardrooms, most of the business equipment (X computers and network) and most support services (such as a receptionist) are included in the monthly office-space fees, resulting in greatly reduced costs and improved efficiencies for business owners.