Breaking Down the Cost of Commercial Construction
Similar to residential construction, the bottom line of a commercial project ranges far and wide. For example, while West Coast five-star hotels demand $577-$850 per square foot, a more conservative commercial office lands at the lower end of the spectrum of $313-$378.
Pricing per square footage aside, the unique demands of pre-construction and project completion carry differing financial factors that affect the overall cost. Walk with us as we transparently explain a handful of factors that determine commercial construction costs.
Location is Key
A key component of breaking down the cost of your commercial construction project is potential geographic arbitrage—the practice of taking advantage of market prices in different places. For example, building your coveted five-star hotel in the south, instead of the west, would be considerably cheaper—but will it provide the greatest return? Alternatively, a northeast requires an investment of $677 to $871 per square foot, but the return makes it worthwhile. Our team considers all of this and more to help clients build strategically.
Building Type and Materials
Although the price per square foot is critical, the range isn’t set in stone until building type and materials come into the picture. A high-rise mall is more complex and expensive than a single-story office building—with material choice driving the bottom-line alongside building type and location. Some opt for a structure made from prefabricated materials, as it costs much less than building a steel structure with extensive fabrications. Custom-built windows, doors, and other equipment drive up costs quickly at the other end of the spectrum. Regardless, your contractor should communicate the specifics and offer expert recommendations along the way.
Finishes Required in Commercial Construction
The finishes—surface elements, paint, and aesthetic additions—dictate the final cost. High-end finishes, as opposed to basic or medium grade finishes, raise the overall price of the building as much as $100 to $150 more per square foot.
Building Quality
Commercial buildings are graded by specific quality standards, impacting cost. For example, buildings with high-quality materials such as top-tier fixtures and mechanical systems are considered Class A and are the costliest to construct. Alternatively, Class B or C buildings are less expensive to build, offering far less modern conveniences.
Compensating the Crew(s)
Labor costs often fulfill forty percent of the total budget. Before beginning work, we evaluate the availability of labor, the type of labor necessary, and the customs prevailing in the local labor market. The presence of labor unions can also impact overall labor costs—active labor unions increase prices, ultimately driving the price per square footage.
Other Factors Impacting Construction Costs
Other soft costs that impact the overall price of a construction project include the following:
Fees
Land costs
Off-site costs
Loans, accounting fees, and interest
Insurances and taxes
Commercial Construction: Quality Built Right, Every Time
Perhaps the most cost-effective thing you can do when beginning a commercial construction project is to hire a prominent, well-established construction company like Burge Corporation.
We’ve been in business for more than 40 years, and will carefully walk you through the entire project with the utmost transparency. To learn more, give us a call at (949) 492-1175 or follow us on LinkedIn.