Construction and Facility Cost Inflation

Definition

Advisors and firms seeking to expand or refurbish physical office locations face escalating construction costs driven by inflation and supply chain disruptions. JLL reports that '64% of respondents from North America reported substantial increases in build costs over the past two years, with some experiencing hikes of up to 20%.' Further, 'half of the firms surveyed anticipate further cost increases of up to 20% over the next 18 months.' For wealth management firms, physical presence remains important for client relationships and meeting regulatory requirements (some custodians require physical offices), despite rising digital delivery. This creates a capital allocation problem: firms need to either refurbish aging offices or build new ones, but construction inflation makes projects significantly more expensive than budgeted. A planned $1M office renovation becomes $1.2M-1.4M. Expansion plans get deferred or scaled back. For small owner-advisors considering office consolidation or relocation to support growth, cost inflation creates material project risk and requires larger capital reserves.

Why This Matters

Flexible workspace solutions/hoteling, remote work infrastructure, lease vs. own analysis services, construction cost consulting, project management for build-outs, alternative space utilization models

Affected Stakeholders

Owner-Advisor, Wealth management firms expanding offices/locations

Related Business Risks