Over a third of the cost of occupying the typical office is accounted for by facilities management, rent and rates comprise just over half. This conclusion, which should not come as news to the FM community but may surprise those working in property, comes from The Total Office Cost Survey.

Breakdown of Total Office Costs - Median of all 25 UK locations

The survey, presented to a special meeting of Nacore's UK chapter at the RICS on Wednesday, was undertaken by City University Business School and Actium Consult and sponsored by MWB Business Exchange. Amost 20 organisations contributed to the survey by providing either definitions or data, including: BT, Coflex, EC Harris, Interior, MITIE, Steelcase, Tectus and WSP.

These consultants and suppliers were used to produce a total capital and revenue cost base for operating a new 5,000 sq m (54,000 sq ft) office facility in 25 different locations across the UK. The new office was deemed to be a Grade A building in a prime location, occupied at 14 sq m/person (including circulation and support). Cost definitions were taken from the Total Occupancy Cost Code by Occupiers Property Databank.

Unsurprisingly, London's West End topped the list as the most expensive location, with total office costs of £1334/sq m. The cheapest was Nottingham, at £513/sq m, the average was £700/sq m. The researchers also looked at cost per workstation which averaged out at £9,744, with the West End, almost twice that at £18,682.

"Rent is the dominant single cost item," said Andrew Axcell of City University Business School, "but there are only three locations where it is more than half of the total – London's West End, Midtown and City." In seven locations, rent accounts for more than 40% and for another 13 it is between 30% and 40%.

When rent and rates are stripped out of the total cost the national variation is really not that great, a function of wage differentials – particularly relevant for labour-intensive services such as cleaning and security.

The real message of this research is that a preoccupation with rent and rates ignores the impact of facilities management and the annualised costs of fit-out and furniture. These costs are particularly important if an occupier leaves the premises early. "The early unplanned exit from long-term commitments can more than double the cost on a per workstation basis," says Axcell.

In the panel discussion that followed the presentation, Nick O'Donnell, VP Global Facilities with Seagram, said that corporates were getting smarter at using their own space: "They are turning it round more quickly or putting in a different level of investment, into cabling systems for example. A split between core and flex space is becoming much more common." However, this would not necessarily be to the benefit of serviced office suppliers, said O'Donnell as corporates may develop their own products.

This analysis is certainly more sophisticated than many studies of occupancy costs. The way costs for the hypothetical office building have been built-up from expert input is particularly impressive. However, sitting in the panelled surroundings of the RICS, under the watchful eye of past Presidents, I couldn't help a heretical thought or two: Why are we still measuring cost per square metre? What happens to the true cost of 'supporting' people if more than one person can use those expensive workstations?

Richard Byatt

The full results of the National Survey of Total Office Cost can be downloaded from the following websites:

www.actiumconsult.co.uk
www.business.city.ac.uk/pvm/news.html
www.mwbex.com