A £500,000 office furniture and fit out project

A £500,000 office furniture and fit out project for £1.00 per square foot

We have recently quoted leasing figures on a £1/2 million office furniture and fit out project. The client is looking to sign a lease on a 10,000 square foot building.

We were asked for an indicative leasing quote based on a five-year term, the rental – as a rough guide – comes to £10,000.00+VAT per month.

Together with the office fit out supplier, we have built a sales strategy around £1.00 per square foot per month.

Breaking the capital cost down to the lowest common denominator

This strategy is nothing new, Olivetti (a famous IT manufacturer from many years ago) did exactly the same. They would take the rental cost of their computers and then illustrate this cost as a daily amount, a policy expressed in their saying; “it’s less than the cost of a cup of coffee every day.”

By dividing the £1/2 million cost by the square feet, and then again amortising this on a lease over five years, we have been able to break the capital cost down to the lowest common denominator.

A 20 x 25-foot meeting room becomes £500.00 per month.  Assuming there are fifty meetings in this room every month, and the cost per meeting is £10.00. Likewise, if an employee has equivalent to 100 square feet of space, then you can attribute a £100.00 cost to them every month.

Allocating office furniture and fit out costs to departments

Many years ago, we were looking to arrange a lease for a very well-known airline. They needed to allocate costs per department / division. One of their key criteria was the ease of changing departments costs. For example, the finance department contracts in space and the marketing department expands. When you have a cost per square foot per month, it is much easier to allocate these payments.

You do not have to lease office furniture and fit out to allocate payments and budget effectively

It is true, you do not have to lease to allocate departmental costs. You could just take the capital cost and divide it by the number of square feet. However there is also the cost of finance. Over five years, your internal cost of finance may go up or down.

There also might be a sperate cost for maintenance of these assets, warranty and the most popular cost now, disposal. All these costs can be included into a lease. This gives a true cost of ownership per month or per square foot.

Why do large cash rich companies lease?

If you ask most companies why they lease, they will say for cash flow reasons. It can be that the company does not have the cash currently, that they wish to preserve their cash or do not wish to use an overdraft or loan facility.

For the larger companies who do have cash reserves, budgeting and allocation of the true costs, this does play a major part in decision making when it comes to leasing.

Companies large and small lease office furniture and fit out

Our office furniture and fit out customers are both large and small companies leasing for a whole variety of reasons. Please call our sales team on 01494 611 456 if we can help with your office move, or for any further information email us on hello@westwon.co.uk .