Setting up a new office involves significant capital expenditure (CapEx), which includes all the costs related to acquiring and maintaining fixed assets like furniture, equipment, and infrastructure. Properly computing CapEx is crucial for budgeting and financial planning, ensuring that your office set-up is both efficient and sustainable.
This guide provides a step-by-step process to help you compute the CapEx for your office set-up.
1. Identify the Scope of Your Office Set-Up
Office Size and Layout: Determine the size of your office and the layout. Consider the number of workstations, meeting rooms, and common areas you will need.
Number of Employees: The size of your team will influence the number of desks, chairs, computers, and other essential equipment required.
Location: Costs can vary significantly depending on the location of your office. Urban centers typically have higher costs for rent, utilities, and labor.
2. List the Essential Components
Start by making a comprehensive list of all the elements needed for your office set-up:
Furniture: Desks, chairs, storage units, conference tables, etc.
Technology: Computers, servers, telephones, networking equipment, and software licenses.
Utilities: Lighting, heating, ventilation, and air conditioning (HVAC) systems.
Interior Design: Flooring, painting, partitions, and décor.
Security: Access control systems, surveillance cameras, and alarm systems.
3. Estimate the Costs
For each component listed, estimate the cost based on market rates or vendor quotes. Consider the following:
Furniture and Fixtures: Research average costs for the quality and type of furniture you need. Factor in delivery and installation costs.
Technology: Include costs for both hardware and software. Consider leasing options if they are more financially viable.
Utilities and Infrastructure: Estimate costs for installing and maintaining HVAC systems, electrical wiring, and lighting. Consult with contractors to get accurate quotes.
Interior Design: Costs for flooring, painting, and partitions can vary widely. It’s advisable to consult with an interior designer to get realistic estimates.
Security: Include initial setup costs for security systems, plus any ongoing monitoring or maintenance fees.
4. Include Additional Costs
Permits and Licenses: Depending on your location, you may need various permits and licenses, which should be factored into your CapEx.
Professional Fees: Include costs for architects, designers, and contractors who may be involved in the office set-up process.
Contingency: It’s wise to include a contingency amount (usually 10-15% of the total budget) to cover unexpected costs.
5. Calculate the Total CapEx
Add up all the estimated costs to get the total CapEx for your office set-up. This total should give you a clear picture of the investment required.
6. Review and Adjust
Budget Review: Compare the total CapEx with your available budget. If necessary, make adjustments by prioritizing essential items or finding more cost-effective alternatives.
Long-term Planning: Consider the lifespan of the assets you’re investing in. Higher upfront costs for durable items might be justified by lower long-term maintenance expenses.
7. Document and Track Expenses
Once you start the office set-up process, keep detailed records of all expenditures. This will help you stay within budget and provide useful data for future office expansion or relocation projects.
Office Pro Philippines helps simplify the above enumerated process of budgeting for CapEx by providing a simple breakdown of the bulked costs required to set-up your office space: Below enumerated are the two major costs to be computed.
I. Rent and other related costs (includes building dues and AC Charges) - compute for the required advance rent and deposits that are due upon signing of the lease contract
II. Fit out and Construction (includes design fee, actual build, and permits application - we can compute using the average all-in fee per square meter that design + build contractors offer.
Example computation:
A company looking to set-up office space for 100 employees in Makati City. They need to be in a Grade A building with high accessibility.
The company was offered One Ayala - a new mixed-use development with a direct connection to the Ayala MRT Station. It also features its own bus terminal and shopping mall.
One Ayala's current rent is PHP 1,400.00 / sqm with building dues of PHP 185.00 / sqm metered AC Charges.
To accommodate 100 employees, the building allows 1:5 density which translates to 500 square meters minimum space. The closest size available is 530 square meters. One Ayala requires 3 months advance and 3 months security deposit.
One Ayala has a Bare Shell handover for their office spaces.
Rent and other related costs: 1,400.00 + 185.00 = 1,585.00 multiply by total floor area leased
1,585.00 x 530.00 sqm = 840,050.00
multiply by total months of advance rent and security deposits required
840,050.00 x 3 = 2,520,150.00
Subtotal for Rent and other related costs = PHP 2,520,150.00
Fitout and Construction costs:
Assuming a mid-end fitout design, multiple vendors offered an average cost of PHP 42,000.00 / sqm all-in scope for design and build, including permit applications.
The company requires a third-party project manager to oversee the construction. The average service fee offered was PHP 2,500.00 / sqm.
Design + build + permits costs multiply by total floor area
42,000.00 x 530.00 = 22,260,000.00
Project Management fee multiply by total floor area
2,500.00 x 530.00 = 1,325,000.00
Subtotal for Fitout and Construction Costs = PHP 23,585,000.00
GRAND TOTAL CapEx Requirement = PHP 26,105,150.00
The above computation is the fastest and simplest way to compute for your company's budgetary requirement for CapEx. Below are important notes that need to be carefully considered:
Goods and services are subject to 12% VAT in the Philippines unless your company is accredited/registered under a government incentive program such as PEZA or BOI.
Depending on the landlord, the advance rent required may not apply on the first months of the lease but rather on the last months of the lease which would mean additional CapEx on the rent costs.
Your fitout and construction costs may drastically go up or down depending on the sophistication of your design.
-------------------------------------------------------------------------
Aside from computing your CapEx, there are other important things you need to be guided on when setting up your office space in the Philippines. You may want to know about the following topics as well:
You can set-up your Office Space through Enterprise Solutions -- an OpEx model approach
Serviced Offices - to jumpstart your office operations
What are the permits you need in setting up your Office Space in the Philippines?