HOUSTON—Creating an office space that attracts top talent and exceeds employees' workplace expectations is critical in achieving a company's business ambitions. But first, there is the complex task of selecting a location that not only matches a culture, but fits the budget.

With regard to comparing costs across locations, JLL has released its first US Fit-Out Guide that combines costs and tenant improvement allowances to show what companies can expect to pay out of pocket for an office build-out in many US locations. US construction and development costs grew 2.7% in 2016 and 2017 is expected to follow suit.

“More than 85 million square feet of US office space leased last year will need some level of construction,” said Todd Burns, Americas president, JLL project and development services.

Nationally, the average cost to build out an office is $196.49 per square foot. But after taking into account the average landlord-provided TI allowance of $43.61 per square foot, the out of pocket cost for tenants is $152.88 per square foot. Coming out on top as the most expensive market to build out an office is Silicon Valley, with out of pocket cost of $199.22, and the most affordable market is Washington DC at $103.88.

“It's no surprise that the Northwest continues to be the most expensive region for office builds. Similarly, as we predicted, the southern cities claimed six out of the 10 most affordable markets,” said Mason Mularoni, senior research analyst, JLL project and development services. “However, due to the range of landlord provided TI packages, some cities that made the top lists were pretty unexpected.”

Indeed, six of the 10 most affordable markets are found in Southern states due to more affordable labor and materials. The average tenant out-of-pocket cost per square foot in Texas is $136.31.

Houston's total fit-out cost is $177.47, the average TI package is $60.00 and the tenant out of pocket is $117.47. Houston has the lowest tenant out-of-pocket costs of all Texas metros thanks to above average TI packages.

“Houston remains one of most cost-effective cities in the country to build. The city, as with other major metro areas across the Southeast, benefits from more affordable labor and materials than other parts of the country,” John Roberts, executive vice president and Houston lead of project and development services group, JLL, tells GlobeSt.com. “And while every project is different, the current state of our leasing market has tenant improvement allowances at an average value that is very beneficial to tenants in the market, reducing their out-of-pocket costs for building out space.”

More Houston numbers include $84.40 hard costs, $21.69 design and fees, $20 to 35 furniture/fixtures/equipment, $7 to 40 AV and IT costs, $2 to 3 security, $1 to 2 moving fees, and $16.13 contingency, GlobeSt.com learns.

“Following several quarters of weak leasing performance, Houston looks to rebound in upcoming quarters as tenants that had delayed leasing decisions gradually re-enter the market. A recovery is contingent upon sustained demand from tenants, as reversing a vacancy rate which has risen by 650 basis points in the past two years will not happen overnight,” says Reid Walter, senior research analyst, JLL Houston.

“More than 85 million square feet of US office space leased last year will need some level of construction,” said Todd Burns, Americas president, JLL project and development services.

Indeed, six of the 10 most affordable markets are found in Southern states due to more affordable labor and materials. The average tenant out-of-pocket cost per square foot in Texas is $136.31.

Instant Insights /

Tenants Gradually Re-enter Market After Delaying

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