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How to Estimate Construction Costs for Commercial Buildings

Photo: PixabayThe quality and the size of a commercial construction project are the most critical variables in determining construction costs for commercial buildings. Other cost drivers include the location of the project, architectural design, and building materials.

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Understanding these factors is essential to create accurate expenditure projections in the planning stage of the construction process.   

Commercial construction costs per square foot

On average, commercial building costs range from $16 to $20 per square foot.  These costs include delivery, foundation, and building packages. In the event of additional finishing such as insulation, average construction costs per square foot commercial could rise to between $30 and $40 per square foot. For example, raised access flooring solutions will always cost more than other normal flooring solutions.

How to estimate commercial building construction costs

Not all types of commercial construction are created equal, as the costs of building vary from one location to another. For instance, the square foot costs for commercial construction in the United States can change depending on the city - for example, New York would be several times higher than a project in Detroit or Atlanta.

a. Building Quality

Commercial buildings have different quality elements that influence the cost. The type of wall and roofing, for instance, would determine whether a building falls under class A, B or C. Average commercial construction costs would also depend on the quality of infrastructure laid in them.

Class A commercial buildings are of the highest quality. These buildings are equipped with top tier fixtures that cost more to acquire, such as HVACs, amenities and technological systems. Their exteriors and interiors are aesthetically pleasing, and in most cases, these types of buildings are in parts of the city where land prices are steep.

Most high rises fall under class A buildings, and that means more materials for the high walls and ceilings.

Class B commercial buildings are of average quality. Their architectural details and fixtures are not as impressive as those of Class  A buildings, but they are decent nonetheless. These buildings are usually less than 4 stories tall.

Class C buildings are located in the least pleasant areas of the city.  They have the least amount of amenities and modern fixtures. Their finishing quality similarly falls below those of class A and class B buildings. Class C commercial office construction costs would be lower than the above two.

Read more about commercial construction:

What is the process of constructing a new commercial building?
How to estimate the cost of an HVAC system for new construction projects
7 ways UFAD and raised floors can help the environment

b. Design & Architecture

Shape classifications also affect the overall cost of commercial building construction. Reduction in floor area and outside wall area, for instance, reduces the construction cost per square meter. A high rise building would cost more than a single story office building, for example.

The simplistic design of a convenience store, on the other hand, would mean that it’s less expensive to construct than a bank tower. The more complex an architectural design is, the higher the commercial construction per square foot cost. That’s because you need more general contractors and materials to bring the project to completion.

c. Labor

Building projects outside metropolitan areas can result in cost savings from anywhere between 2% to 6% than those in the heart of the city. The cost per square foot varies because of cheaper labor and associated factors. 

On the other hand, construction done in adverse weather conditions or after a flood or hurricane can temporarily increase types of construction costs by 25% to 50%.

That’s because it’s hard to find skilled builders willing to work under such harsh weather conditions, and many charge a premium on their services in this case. While the conditions may be temporary, they affect the construction costs for commercial buildings either way.

d. Construction materials

Expenses here include the costs of the materials, taxes and shipping charges.  Construction materials include bulk materials, standard off the shelf materials, and fabricated members.

In the construction industry, it’s commonly understood that skyscrapers have high commercial construction costs per sq ft because of the amount of materials that they require. Because they’re commonly steel buildings with expensive aesthetics, the costs can go up even more if their complexity increases.

e. Permits

Calculations for new commercial building construction costs should also factor in permit fees. The cost of permits depends on the location of the construction project and the type of work to be undertaken on site. Permits are often calculated using local fee schedules.

f.  Mechanical systems (HVAC)

Every building owner wants enhanced comfort and efficiency on their property. In commercial properties, for instance, mechanical systems are a must-have, including air conditioning, heating, and cooling, plumbing and energy elevator fixtures. Involving mechanical and electrical contractors early on in the design stage can help to minimize errors and promote cost effective practices. 

Using a UFAD mechanical  system can reduce installation costs and increase functional square footage, thereby decreasing the average cost per square foot.

g. Electrical systems

Electrical installations in a commercial building must meet the requirements of the National Electrical Code. Compliance with NEC stipulations doesn't, however, lead to automatic energy efficiency.  Expert design insights are needed at an early stage to achieve energy efficiency and reduce commercial construction building costs.

h. Delivery

Bulk materials such as gravel entail high delivery costs which can drive up the overall project estimate. Other materials such as piping and valves fall under standard off-the-shelf materials, which means the delivery process isn’t too complex or pricey. The cost of fabricated materials, on the other hand, would depend on whether they are fully or partially fabricated before shipping.

So when it comes to estimating construction costs for commercial buildings, you must take into account delivery factors too. 

How to estimate construction costs for commercial projects

For a ballpark estimate of how much your commercial project might cost, you can follow these steps:

  • Establish the building quality class
  • Calculate the area of the first floor
  • Multiply that by square foot costs estimates as explained above
  • Add the costs of mechanical and electrical fixtures
  • Add the costs for the second and higher floors
  • Add the costs for service garages, equipment bays, training facilities and staffed fire stations to get the total construction cost

For would-be commercial building owners, the cost of construction is one of the biggest questions on their mind. There is no straightforward answer or criteria for arriving at commercial building cost projections - but understanding the variables that affect commercial construction costs can help you make accurate estimates and design pathways to minimize expenses.

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