Understanding Changes in Project Costs Is Crucial to Designing Great Workplaces

Construction costs are rising at historic rates for office buildings and workplace interiors. Inflation, supply chain stress, and labor shortages are the main culprits, but those factors don’t tell the deeper or whole story. The dynamic and evolving situation is more nuanced and complex. Examine and scrutinize the numbers underlying the building industry’s cost conditions, and you’ll find both challenges and opportunities for the design, construction, and delivery of great workplaces.

According to Gensler’s 2022 U.S. Workplace Interiors Insights Report, there are several key headwinds facing workplace construction:

1. Within the building industry, costs are rising fastest for mechanical, electrical, and plumbing (MEP) elements and general conditions (GC).

2. Delays, precipitated by pandemic-related labor shortages and supply-chain breakdowns, are causing further price increases — particularly on larger projects, where delays are more pronounced.

3. Median hard construction costs per usable square foot (USF) have increased 8% annually since 2017 and 35% cumulatively between 2017 and 2021.

4. Hard construction costs vary significantly across industries and regions, with tech companies seeing the highest increase in buildout costs, and markets in the northeast and northwest remaining the most expensive places to build.

These challenges are triggering confusion in the building industry and causing many to ask how the evolving cost situation will impact the creation of effective and inspiring workplaces.

Searching for Clarity

For workplace developers, designers, and tenants who are now rethinking the office in response to pre- and post-pandemic influences on new ways of working, today’s cost challenges are particularly acute.

Given the increase in hybrid work modes across the knowledge economy, many people won’t be going into the office just to get work done. Today’s workplace must be a destination that can inspire existing employees and attract new talent with connections, interactions, culture, and collaborative experiences they can get at the office that simply can’t happen at home or in a remote working environment.

The challenges in costs and the rising importance of in-person collaboration and experience makes the creation of great workplaces more important than ever. It’s also another reason why there are growing concerns around escalating construction costs. Are these rising costs squeezing budgets for the types of design elements that transform the workplace into an environment where people want to spend their days?

Creating Opportunities and Successful Outcomes

To answer that question, everyone involved in the planning and design of workplaces (real estate professionals, designers, building owners, and office tenants) would benefit enormously from greater clarity on today’s dynamic cost conditions. Such transparency can help them establish budgets at the outset that are better tailored to their workplace strategy and more aligned with market realities. The 2022 U.S. Workplace Interiors Insights Report provides exactly that clarity by offering a deeper look into current cost conditions, specifics, and makeup, providing a path toward meaningful and actionable measure