Commercial construction costs per square foot

commercial construction costs 2018

For anyone working within the commercial construction industry, figuring out the costs per square foot may appear somewhat elusive at first glance, even after conducting preliminary research. 

Compiling accurate data for the project – including its location, the type of building you’re looking to build, and the local economy – all are vital factors to consider when estimating commercial construction costs.

Keeping this information in mind, it is essential to understand the cost drivers for any commercial project – and how building type, construction type, and location can all be huge variables that will drive your cost per square foot. These are always a part of the initial programming discussions, and the architect will play a crucial role in determining projected expenditures. 

This article will explore the different types of commercial construction costs based on the type of building, location, and other variables that affect a project’s bottom line.

Identifying Costs Based On Type Of Building & Materials

construction estimate clipboard

First and foremost, not all construction types cost the same per square foot. More importantly, the cost of construction per square foot varies substantially with location throughout the United States.

For example, in the instance of a single-story office building, location alone can represent as much as 70% of the cost driver, as the median range for this type of construction is between $160 and $170 per square foot. Not surprisingly, New York tops the charts for the most expensive city to build for every structure type.

On the other hand, convenience stores are generally less expensive to construct than different building types due to their simplistic architectural nature. The median cost for this commercial building type is around $100 per square foot.

However, with the new trend of fast-food becoming more of a boutique experience, the cost for a typical fast-food restaurant is on the rise. Expenses for kitchen equipment also drive this building type’s costs to a median of nearly $200 per square foot.

Climate also plays a big part in location-specific expenses. Buildings in colder climates may need to handle large volumes of snow and therefore be engineered accordingly; the same logic would apply for building structures in areas prone to hurricanes.

With so many variables involved, price figures per square foot can vary radically in commercial steel buildings. While the interior and exterior finishes are the primary contributors to driving overall costs, local building regulations can also influence a steel commercial building’s cost.

Before signing a contract for a prefabricated steel commercial building, it pays to check into local building requirements to ensure the building will satisfy building codes. Furthermore, most local jurisdictions require a building permit for the construction of a commercial steel building.

U.S. Commercial Property: Facts & Statistics

USA Commercial Property and Buildings

According to, commercial property refers to property used for business purposes. A popular area for investors, commercial properties are often rented out to other individuals or companies, who then use the spaces to run their businesses. 

The U.S. commercial property sector includes the following key segments:

  • Industrial
  • Retail
  • Office
  • Lodging
  • Amusement

The value of private office construction starts in the United States amounted to 10.91 billion U.S. dollars in the first half of 2020.

The site also reports that the commercial construction industry in the U.S. has been steadily expanding since 2010. This expansion means that the number of individuals employed within the increased accordingly.

As 2020 has been a turbulent year, we can’t yet understand if actions such as vacating commercial buildings are a trend or a temporary result of the coronavirus.

If we look back at 2019, statistics show that commercial rents are rising in all sectors.

Average retail rent increased by 1.7% in the second quarter of 2019.

Most notably, vacancy rates in commercial buildings, including both the retail and industrial real estate sector, have shown a declining trend and were projected to amount to 7% as of the final quarter of 2019.

Helpful Tips: Options To Consider For Your Next Commercial Construction Project

Commercial Construction Project

Depending on the type of commercial construction project you are planning, there are several ways to save and/or allocate your expenditures when pricing out materials and labor. 

Below, a general guideline to keep in mind when researching your options:

  • Manufacturers: Because manufacturers often sell to the public, you don’t have to pay for a middleman’s markup costs. However, it’s important to note that the manufacturer only makes the buildings; they will not assemble it for you. Therefore, if you wish to customize your building, you have the option to work with a designer to meet your requirements and aesthetic/architectural specifications. Insulation may or may not be available from the manufacturer, and in most cases, your foundation will not be included.
  • Brokers: This may be a feasible option for your commercial construction project if you have a fairly concrete idea of what you want. A broker can research the various manufacturers, bargain on your behalf for the best price, and take care of buying the building and getting it delivered. However, you will still be responsible for the foundation and insulation of the building.
  • General Contractors: Typically, general contractors have a preferred manufacturer or broker. The GC will arrange for the purchase, delivery, and assembly as part of their contract with you; also, the markup on the building will most likely be a part of their bill to you. While working with a GC is the fastest and most convenient way to execute a project, it may not be the most cost-effective.

Looking Ahead: Cost-Impact Factors For Commercial Construction In 2018

Based on the information covered in this article, it should come as no surprise that the cost of constructing new commercial spaces is changing in 2018.

Research indicates that it may be a good time to invest in commercial, industrial, and multifamily construction across the U.S.

Below, some of the national and local industry factors that currently impact the cost of commercial construction in 2018:

Cost of Insurance on Construction Materials

Cost of Insurance

Across the United States, the cost to insure non-combustible construction materials (e.g., concrete) is less costly than insuring combustible construction materials (such as wood and plastic). Insurance costs may also be higher in some regions of the country where environmental and geographic features can increase the risk of structural damage.

For example, in New Jersey, the cost to insure concrete is far cheaper than the cost to insure wood.

Insurance premiums for commercial properties in Edgewater, New Jersey, were estimated to cost over $52,000 to insure wood, compared to $22,120 to insure concrete. 

In commercial property construction, opting to construct with concrete instead of wood will lead to an average of 57.7% savings. Additionally, insurance rates can also be dependent on specific architectural factors, such as how a commercial property’s roof is constructed. 

Construction companies have different insurance pricing systems, so insurance prices fluctuate across the state. Therefore, it’s wise to compare contractors before you proceed with any commercial construction project.

Steel Tariffs

In 2018, it was projected that fabricated steel would see a substantial price drop. However, with President Trump’s plans to place hefty tariffs on steel imports, this could dramatically impact the cost of fabricated steel.

The US produces 5% of the world’s steel, one of the world’s top five steel producers. China produces 49% of the world’s steel, followed by the European Union at 10% of global steel production.

Should the President’s 25% tariff on steel imports be passed into law, steel cost in construction would see a considerable increase. While the U.S. produces a fair amount of steel, the U.S. construction industry still relies heavily upon imported steel. There would also be a 10% tariff on aluminum imports, which is fundamental to sustainable construction efforts. Whether or not the steel tariffs pass through legislation will determine how the cost of steel changes, both domestically and internationally.

Labor Shortage

According to reports as seen in, there is a shortage of skilled construction laborers across the United States.

Even with tax reform and regulatory rollback, increasing optimism – many firms predict more business and new hires in 2018. According to a survey by the Associated General Contractors of America – builders and developers are uncertain about finding additional skilled labor.

According to the Bureau of Labor Statistics, with the U.S adding roughly 210,000 new construction jobs in 2017 and currently experiencing low unemployment, the industry’s growth keeps it from getting ahead of rising demand for workers. 

Research has shown that part of this trend is due to the rise of younger generations pursuing white-collar careers over blue-collar careers. Explains Randy Strauss, owner of Strauss Construction in Amherst, Ohio, “The number one issue is the cost and availability of labor.” Generation ‘Z,’ which reflects individuals under the age of 21, are increasingly attending higher education over vocational schools. Frank Shaw, an economist with Fannie Mae, says that the data shows hiring and wages are up for construction workers, but building is still slow overall, based on pre-recession numbers.

Ever since the recession, more than 1.5 million residential construction workers have left the industry, and those in today’s building trades have an average age of around 50, which in turn drives up the cost of labor. Since there are not many young professionals moving into a career as a construction laborer, the construction price will continue to be more expensive than in years past. Therefore, the cost of employing skilled construction laborers will need to be a factor in your project’s budget.

Modular Options in Commercial Construction

With today’s ever-increasing popularity to comply with environmentally-friendly designs, modular construction options remain a popular commercial construction choice. 

These green options consist of pre-fabricated pieces of a building, which are built off-site and consequently lead to minimal site disruption, as well as an efficient construction completion. 

The price of modular commercial construction can vary substantially, from costs ranging from $35 per square foot to as much as $100 or more per square foot.

On a national scale, modular construction costs average between $35,000 and $200,000. Research has shown that the cost of modular commercial construction across the country will be impacted by the labor shortage and cost of construction materials. However, since the site for construction is shorter, the expenditures for skilled laborers will be less costly than in other projects.

Increased Demand for Industrial Spaces

As the rise of e-commerce giants such as Amazon and Blue Apron increases, the demand for new industrial spaces across the country continues to grow.  Because of the heavy demand, the cost to rent industrial spaces is extremely expensive, with some spaces costing as much as $88 per square foot. Although constructing a new area may seem costly at first glance, it will be a wise investment in the long run.

Due to the reliance upon more expensive materials (such as steel), a larger industrial space will cost more to construct at the outset; however, the cost per square foot will be more attractive to new clients.

Therefore, new industrial warehouse construction will find tenants easily due to the increased demand for more space.


In summary, the commercial construction cost will be heavily impacted by the fluctuating costs of building materials. The shortage of skilled construction laborers will also impact construction expenditures. However, according to statistics and current industry trends, the United States is poised to see growth in construction efforts throughout 2018 and beyond.

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