Key Cost Drivers: Commercial Offices

Presentation | 25 November 2009

Global construction consultants

Agenda
Introduction
Key Commercial Definitions
Commercial Clients?
How do we meet our Clients Requirements?
Any other questions

Introduction

Presentation from the UAE

Commercial Sector. The purpose
of this presentation is to provide
you with an understanding of what
the Key Construction Cost Drivers
are in a Commercial Office
Development.

Key Commercial Definitions

Shell & Core
CAT A
CAT B
Grade A Office Space

Key Commercial Definitions

Shell & Core
Comprises the substructure, superstructure, faade,
common landlord areas, internal wall divisions that
separates office space from the common areas, and
associated MEP installations. Unfinished office space.
Finished Core Areas (common toilets and lift lobby corridors,
staircases etc.), Finished Building Entrance Lobby (typically
complete with reception desk, floor / wall / ceiling finishes etc.)
Base build MEP life safety systems (Smoke detectors, emergency
lighting and fire alarm).

Key Commercial Definitions

CAT A
Shell & Core + Raised Floors and ceilings to office areas, permanent MEP
life safety systems (smoke detectors, emergency lighting and fire alarm),
Task lighting and under floor power bars, including IT containment.

Key Commercial Definitions

CAT B
Shell & Core + CAT A + division walls, carpets, fixed furniture,
system workstations, AV equipment, specialist lighting etc. (ie:
ready to move in).

Key Commercial Definitions

Grade A Office Space
Discussion amongst property professionals highlights the fact that there is little consensus
regarding what a typical Grade A building actually comprises. It is evident that in a number
of cities, Grade A space to international standards does not exist in any great magnitude. It
is noted that while a number of developments alluded to an international standard, there
was little hard evidence to back up these claims. In fact, most schemes fall short of what
would be considered as Grade A space in the UK. However, this is not necessarily
surprising because even in the mature markets, such as London and New York, the
definition of Grade A space is somewhat imprecise. For example, the US National
Association of Industrial and Office Properties have defined a classification system for all
categories of office space that is relatively vague in its meaning.
Class A buildings are well located relative to the needs of the major tenant sectors in the
marketplace. Building systems (mechanical, HVAC, elevator and utility) have capabilities
that meet both tenant current requirements as well as anticipated future needs. The
building finishes have high quality design and materials and the building must remain
competitive with new construction. Tenant finishes are characterized by efficient layouts
and the best quality trim and interior finish. Building services are characterized by above
average maintenance, management, and upkeep. Buildings must exhibit more than one of
the characteristics but need not exhibit all of the characteristics to be considered Class A.

Key Commercial Definitions

Grade A Office Space (continued)
While in Central London the grading of a building as 'A' is not an objective
classification, with a number of specification requirements assumed and many
present but not necessarily pre-requisites for Grade A status.
As a general rule of thumb, a Grade A building must have:
- Air-conditioning or heating
- Raised-floor provisions
Plus two of the following
- Good floor plates (including suspended ceilings with integrated lighting)
- Plant no more than 5 years old and plant to have minimum 15-20 year life
- High quality reception area (double height and quality finishes)
This generic definition of Grade A space translates easily across borders and is a
term commonly used throughout most cities. However the standard of office space
that this relates to is very much determined by local practice.
The subjective nature of these definitions has some implications for investors and
users of office space operating across borders. Due to the lack of direct
comparability there is a need for a greater level of insight in the emerging markets
including the need for studies such as this one setting out the locally acceptable
parameters.

Commercial Clients
Who are our Clients and how do they effect construction costs?
Owner Occupiers
Developers
Tenants

Commercial Clients?
Owner Occupiers
Owner occupier specific requirements
Compliant with their business motto
Company policies (ie: their own vision of sustainability, modern,
open plan etc).
International standards rolled out across the globe.
Company Safety Requirements.
Locations (ie: vicinity to nearby residential areas, access to
main roads and highways etc.)

Commercial Clients?
Developers
Make buildings that are attractive to tenants (ie: finishes,
modern external facades, iconic / signature building etc.)
Compliant to the business needs of the landlords and tenants
Building specification pitched at the right audience
finishes and fit out grade, floor to ceiling heights, large
spans for studios
Compliance with their sustainability policies the use of eco
friendly products, green / brown roofs, high LEED /
Estidama Pearl ratings, Photovoltaics etc.
Looking to increase profitability of the development (ie:
inclusion of retail units etc.)

Commercial Clients?
Tenants
Specific business requirements such as:
Building Autonomies/Redundancies
Additional Services (Gyms, Shops etc)
MEP Equipment Capabilities
Company Image
Landlord Rental Requests

How do we meet our Clients Requirements?

Through careful consideration

of the key design drivers for
office buildings, the conditions
for success can be identified
and examined to understand
their impact on the overall
construction cost

Design Efficiency
The key design drivers under examination in this section are:
Floor plate design
Net to gross efficiency
Core efficiency
Faade and envelope strategy; wall to floor ratio
Structural solution

Design Efficiency
Floor plate design

The shape and form of a floor plate is one of the largest contributors to the success of the design
and cost.
Its form influences architectural, structural and servicing strategies, in addition to more fundamental
economic, planning and aesthetic considerations.
The layout and plan of the typical floor plate has a direct influence on the net to gross efficiency and
the wall to floor ratio which both in turn affect the construction costs.
The square or rectangular floor plan is a simple and effective shape for office design.
The irregular floor plate generates greater articulation in the faade and requires proportionally
more faade area which reduces the wall to floor ratio and increases the cost/sqm.

Key Commercial Definitions

Net to gross ratio
The net to gross ratio is calculated by dividing the net internal
area by the gross floor area. This typically represents the
proportion of saleable space relative to space lost to circulation,
structure and services distribution. The higher the percentage
value, the better as this represents a more efficient building
from a design / cost perspective.

Design Efficiency
Net to gross efficiency

The net to gross ratio plays an important element in the appraisal of spatial requirements, as it
reflects the proportion of usable space relative to the space lost to circulation, structure and
services.
Irregular floor shape and /or enlarged cores reduce building efficiency and increase the cost/sqm.
A good net to gross efficiency on a typical office floor should be 80-90%. Overall it should be
65-75% depending on the height of the building.

Design Efficiency
Core efficiency

Well planned cores are key in order to improve the net to gross efficiency.
Careful consideration of staircases and plant space is necessary, together with the lifting strategy,
WCs and circulation space, in relation to net lettable floor area.

Wall to Floor Ratio Definition

Wall to floor ratio
The wall to floor ratio is calculated by dividing the external wall
area by the gross floor area. A smaller wall to floor ratio value
indicates that less wall area is required to enclose an equivalent
area of floor space whereas a higher value indicates that more
wall area is required. The former is more sought after because
this represents a more economic design from a design / cost
perspective. Please refer to the RICS (1969) Standard Form of
Cost Analysis for further information.

Design Efficiency
Faade and envelope strategy

The wall to floor ratio is a well used indicator of cost efficiency of a building a low figure indicates
better efficiency and lower cost/sqm. 0.35 is regarded as very efficient. Significant articulation /
indentation will push it over 0.50
E.g. 0.05 increase in wall:floor ratio on a 200,000 m 2 building, with a faade costing AED 4,200 m 2,
will result in a circa 3% increase in shell and core cost.

Design Efficiency
Structural solutions
A number of structure forms may be optioneered early in the design
stage.
Structural solution will depend on loading, shape and form, height, fire
protection and speed of construction.
Optimum solution in UAE has traditionally been concrete frame.
Alternative steel solutions becoming more common as the UAE
market and supply chain develops, commodity prices fluctuate and
availability of local steel improves.
Combined steel and concrete solutions are also becoming more
common
Relative costs of steel vs concrete vary with building form and shape.

Other Factors
Local Authority Requirements
UPC Car Parking Requirements
Provision of Prayer Rooms
Floor to Ceiling Heights
Means of escape, occupancy load and fire resistance
Provisions for the disabled
Sourcing of materials (illegal to source from certain countries)
Minimum building specification requirements (ie: health and safety
regulations, to cope with the heat and dust in the U.A.E. etc.)
Single Tenancy versus Multi Tenancy

Specific Commercial Questions when putting together a Cost

Plan?
What Grade of Office do you want?
Do you want it to shell & core, CAT A or CAT B?
Who is going to use it Speculative Tenants or Owner Occupiers?
Is it going to be Iconic or Efficient? What ratios are you looking
for?
What building redundancies are you looking for?

The Future Building Demands are Changing

Single Use

Multiple Use

Complex mixed use

(yesterday)

(today)

(tomorrow?)

MONOCENTRIC

POLICENTRIC

NETWORK

Any further questions

For additional queries, please contact:
Andrew Rotteveel
andrew.rotteveel@davislangdon.com

End of Presentation. Thank you.