How to Accurately Calculate the Rebuild Cost of an Office Block (UK Guide)

Introduction

If you insure an office block, the “rebuild cost” (also called the reinstatement cost) is one of the most important numbers on your policy. Get it right and you’re far more likely to be properly protected after a major loss. Get it wrong and you can face underinsurance, reduced claim payments, delays, and painful cashflow gaps.

This guide explains, in plain English, how rebuild cost is calculated, what should be included, what’s commonly missed, and the practical steps you can take to arrive at a defensible figure.

What “rebuild cost” actually means

Rebuild cost is the estimated total cost to reinstate the building from scratch after a total loss (for example, a major fire) to a similar specification, in the same location, complying with current regulations.

It is not:

• The market value of the property

• The purchase price

• The mortgage value

• The rental income

• The land value

• A simple “£ per square foot” guess without adjustments

For insurance purposes, rebuild cost typically includes:

• Demolition and site clearance

• Professional fees (architects, engineers, surveyors, project managers)

• Rebuilding works (structure, finishes, services)

• Compliance upgrades to current Building Regulations

• External works (where applicable)

• Inflation and cost escalation allowances

Why accurate rebuild cost matters (underinsurance explained)

Most property policies apply an average clause (also called the condition of average). If you insure for less than the true rebuild cost, insurers may reduce a claim payment proportionally.

Example:

• True rebuild cost: £10,000,000

• Sum insured: £7,500,000 (25% underinsured)

• Claim: £2,000,000

• Insurer may pay: £1,500,000 (25% reduction), less any excess

That shortfall lands with the building owner or managing agent.

Step-by-step: how to calculate rebuild cost for an office block

A robust rebuild cost estimate usually follows a structured method:

1) Define what you’re rebuilding

Start by documenting the building clearly:

• Address and site constraints (city centre, restricted access, working hours)

• Building type (office block, mixed-use, office over retail, etc.)

• Number of storeys (including basements)

• Gross internal area (GIA) and/or gross external area (GEA)

• Construction type (steel frame, reinforced concrete, masonry, curtain walling)

• Roof type (flat roof, plant deck, green roof)

• Age and refurbishment history

• Fit-out level (shell & core vs Cat A vs Cat B)

• Building services complexity (HVAC, sprinklers, lifts, BMS)

The more accurate the “scope”, the more accurate the rebuild cost.

2) Measure the correct floor area (don’t guess)

Rebuild cost is often driven by area. For office blocks, GIA is commonly used because it captures usable and non-usable internal space.

Be careful with:

• Basements and plant rooms

• Stair cores and lift shafts

• Service risers

• Atriums and double-height spaces

• Car parks (undercroft or multi-storey)

If you don’t have reliable drawings, consider a measured survey. A small measurement error on a large building can become a six-figure insurance error.

3) Choose an appropriate base rate (and understand what it includes)

A common starting point is: $$ \text{Base rebuild cost} = \text{Area} \times \text{£/m}^2\text{ rate} $$

But the key is selecting a rate that matches your building’s specification and complexity.

A generic office rate may not include:

• High-spec façade systems

• Multiple lifts

• Complex HVAC (VRF, chillers, AHUs)

• Raised access floors and suspended ceilings

• Fire engineering features

• Sprinklers and smoke control

• High-end reception finishes

If you use a published cost guide, read the assumptions carefully.

4) Adjust for location and site constraints

Rebuild costs vary significantly by region and by site conditions.

Common uplift drivers:

• London and South East labour rates

• Restricted access (tight streets, no laydown area)

• Working hour restrictions

• Neighbouring property protection requirements

• Traffic management and logistics

A city-centre office block can cost materially more to rebuild than a similar building on an out-of-town business park.

5) Add demolition, clearance, and enabling works

Total loss scenarios usually require:

• Demolition of remaining structure

• Asbestos surveys and removal (particularly for older buildings)

• Site clearance and waste disposal

• Temporary works and hoarding

• Making the site safe

These costs can be substantial and are often under-allowed.

6) Include professional fees

Professional fees are frequently forgotten or underestimated. A sensible allowance (depending on complexity) may include:

• Architect

• Structural engineer

• M&E engineer

• Quantity surveyor

• Principal designer (CDM)

• Project manager / employer’s agent

• Planning consultant (if needed)

• Building control and inspections

As a rough guide, professional fees can be 8%–15% of build cost for many commercial projects, but complex sites can be higher.

7) Factor in Building Regulations and compliance upgrades

A rebuild is not a “like for like” copy of an older building. You may need to comply with current standards, such as:

• Fire safety requirements (compartmentation, alarms, smoke control)

• Accessibility (Equality Act considerations)

• Energy performance and insulation standards

• Electrical safety and modern M&E requirements

These upgrades can increase the reinstatement cost versus the original build.

8) Account for building services (often the biggest swing factor)

For office blocks, M&E can be a major portion of the rebuild cost.

Consider:

• HVAC systems (chillers, boilers, heat pumps, AHUs)

• Ductwork and pipework distribution

• Controls and Building Management Systems (BMS)

• Electrical distribution, risers, generators/UPS

• Fire alarm, emergency lighting

• Security, access control, CCTV

• Data cabling and comms rooms

• Lifts and lift maintenance access

If your building has multiple lifts, high-capacity cooling, or specialist comms infrastructure, your cost rate should reflect that.

9) Don’t forget external works

Depending on the policy wording and what’s insured, external works may need to be included:

• Hardstanding, paths, kerbs

• Boundary walls and fencing

• External lighting and signage

• Drainage and utilities connections

• Landscaping

• Car parks and line marking

Many underinsurance problems come from assuming the “building” is only what’s inside the walls.

10) Add inflation (and keep it updated)

Construction inflation can move quickly. If you calculate rebuild cost once and never revisit it, you can drift into underinsurance.

Practical approach:

• Review sums insured annually at renewal

• Reassess fully every 3–5 years (or after major works)

• Apply index-linking where available

A practical worked example (simplified)

Let’s say you have:

• 5-storey office block

• GIA: 3,000 m²

• Base rate (adjusted for spec): £2,200/m²

1. Base build cost: $$ 3,000 \times 2,200 = 6,600,000 $$

2. Demolition and clearance (say 5%): $$ 6,600,000 \times 0.05 = 330,000 $$

3. Professional fees (say 12% of build cost): $$ 6,600,000 \times 0.12 = 792,000 $$

4. External works allowance (say 3%): $$ 6,600,000 \times 0.03 = 198,000 $$

Subtotal: $$ 6,600,000 + 330,000 + 792,000 + 198,000 = 7,920,000 $$

5. Contingency / abnormal site constraints (say 5%): $$ 7,920,000 \times 0.05 = 396,000 $$

Indicative rebuild cost: $$ 7,920,000 + 396,000 = 8,316,000 $$

This is deliberately simplified, but it shows why “area × rate” is only the beginning.

Common mistakes that lead to underinsurance

Here are the issues we see most often:

• Using market value instead of rebuild cost

• Excluding demolition and debris removal

• Ignoring professional fees

• Forgetting basements, plant rooms, or car parks

• Using a generic £/m² rate that doesn’t match the building spec

• Not accounting for site constraints and access

• Not updating the figure after refurbishments

• Assuming tenants’ fit-out is irrelevant (it depends on lease and policy)

Who should calculate rebuild cost?

For an office block, the most defensible option is usually a professional reinstatement cost assessment by a chartered surveyor.

That said, a structured internal estimate can still be useful:

• As a sense-check before renewal

• To identify obvious gaps

• To decide whether a formal valuation is needed

If the building is large, complex, listed, or has unusual construction, professional input is strongly recommended.

How often should you review rebuild cost?

A sensible approach for many office owners and managing agents:

• Annually: sense-check and apply index-linking

• Every 3–5 years: full reassessment

• Immediately after: major refurbishments, extensions, change of use, or significant M&E upgrades

FAQ: Rebuild cost of an office block

Is rebuild cost the same as reinstatement cost?

Yes—these terms are often used interchangeably in commercial property insurance.

Does rebuild cost include VAT?

It depends on your VAT status and policy wording. Many commercial insureds can reclaim VAT, but not always. Your broker or insurer can confirm how VAT should be treated for your situation.

Should I include tenants’ improvements and fit-out?

It depends on who is responsible under the lease and what the policy covers. Some office blocks are insured on a “shell and core” basis; others include landlord fixtures and sometimes tenant fit-out.

Do I need to include professional fees even if I wouldn’t use an architect?

In a major rebuild, professional services are usually required (design, compliance, project management, inspections). Insurers commonly expect fees to be included.

What about inflation—can I just index-link?

Index-linking helps, but it’s not a substitute for a proper reassessment—especially after refurbishments or when construction costs shift quickly.

Can I use a £/sq ft figure from another building?

You can use it as a rough sense-check, but it’s risky. Two office blocks with the same area can have very different rebuild costs due to façade, M&E, access, height, basements, and specification.

Conclusion

Calculating the rebuild cost of an office block is about more than multiplying floor area by a generic rate. A reliable figure reflects the building’s true scope, specification, services, site constraints, professional fees, demolition, external works, and realistic allowances for compliance and inflation.

If you want to reduce the risk of underinsurance, treat rebuild cost as a living number—review it regularly, update it after works, and consider a professional reinstatement cost assessment for larger or more complex buildings.