Before commencing the construction of a commercial building, the biggest and initial concerns are always the construction costs per square foot. Commercial buildings are used in different sectors such as education, health, and retail. Dependent on usage and other factors such as location, the costs can vary greatly. The area's zoning and geography also affect the construction costs per square foot, whereby materials are more expensive in earthquake-prone regions. Controlling these costs helps owners finish their projects on budget and allows contractors to protect profit margins.
This article will discuss the average construction costs per square foot and have derived the data from Cumming's U.S. Construction Per Square Foot Data.
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The average commercial construction costs per square foot
The location alone is one of the most significant cost drivers for commercial buildings. The median construction cost ranges from $350 per square foot for small installations. Prices in areas like New York go up to $450 per square foot. Below is a table showing the construction cost ranges of different commercial buildings.
|Building type||Cost per square foot|
|Single story office||$289-$437|
|Government administrative buildings||$426-$844|
|Museum/ Performing arts||$650-$1272|
|Medical Office Buildings||$451-$1018|
Commercial construction costs per square foot: By Region
Location is a significant driving factor for construction costs as they vary from State to State. It affects up to 70% of the overall construction costs. Places like New York top the charts as the most expensive city to build in. Another location factor affecting prices is the climate. Buildings located in cold climates may need design considerations to factor in the massive snow volumes, which considerably drive up the costs. The local jurisdictions have different construction cost permits when it comes to the construction of commercial buildings. Below is a breakdown of the construction costs within various regions in the U.S.
Comparing the figures in the cities such as New York, Washington, Boston, Philadelphia, and Raleigh Durham, we have developed the average construction cost estimates per square foot in Eastern U.S. On the high end, the average construction costs of a single-story commercial building are $361 per square foot, while it is $301 per square foot on the low end. The average costs range between $599 on the low end and $719 on the high end for the mid-rise office buildings. High-rise buildings are the most expensive, with highs and lows of $827 and $688, respectively.
The neighborhood strip centers average high and low costs of $371 and $309 per square foot. Shopping malls in the Eastern U.S. are also expensive, ranging between $461 on the lower end and $554 on the higher end.
The average cost of a three-star hotel on the lower side is $489, while the cost shoots up to $604 on the higher side. However, the prices of a five-star hotel are almost one and a half times more, with the costs ranging between $677 and $871 per square foot.
The costs range between $317 and $381 on the lower and higher end averages in school constructions.
The average costs in the Western U.S. were the average costs of cities located there. These are Las Vegas, Seattle, Honolulu, Portland, Sacramento, and San Diego.
For single-story commercial buildings, the average cost is $313 on the low end and $378 on the high end. The average prices are $481 on the low end and $607 on the high end for the mid-rise commercial buildings. Finally, the costs of high-rise buildings average $557 on the low end and $730 on the high end.
Neighborhood strip centers in the Western U.S. average highs of $413 and lows of $261, whereas the shopping malls have highs and lows of $575 and $442, respectively.
The cost of three-star and five-star hotels also varies. The three-star hotels have high average costs of $545 and average lows of $402. However, the prices of five-star hotels are a notch higher, with costs ranging between highs and lows of $849 and $577, respectively.
When it comes to school facilities, the costs range between $341 and $417. The construction costs in Honolulu are, however, significantly higher by $10 per square foot.
Due to climate differences, the building costs in the U.S. Midwest vary. However, the expenses are averaged from three cities in the Midwest: Denver, Nashville, and Chicago.
When it comes to a single-story commercial building, the costs average highs of $298 and lows of $237 per square foot. The cost of a mid-rise building averages $454 on highs and $556 on lows. High-rise buildings are a bit expensive, with highs and lows of $689 and $554.
In the Midwest, neighborhood strip centers are cheaper compared to other regions in the U.S. The costs range between lows and highs of $284 and $340, respectively.
When it comes to hotel facilities, the costs of a three-star hotel average between $400 and $533; in contrast, a five-star hotel stands between $537 and $762.
For school buildings, the costs range between $290 and $242.
The average construction costs in Southern US were taken from cities such as Dallas, Orlando, Atlanta, and Miami.
A single-story commercial building in Southern US averages low costs of $238 per square foot and high costs of $286 per square foot. A mid-rise building costs between $569 on the higher side and $474 on the lower side. Building a high-rise commercial building will need more capital as the prices range between $545 and $654 per square foot.
In Southern US, neighborhood strip malls cost between $245 and $294, whereas shopping malls range between $683 and $462.
Hotel facilities differ between three-star and five-star facilities. A three-star hotel ranges between $478 and $371, while a five-star facility costs between $62 and $683.
As for educational facilities, the school buildings cost between lows of $217 and highs of $260.
Commercial construction costs per square foot: By building type
The construction costs vary immensely depending on the type of building. We have given average estimates based on location in the U.S., but now we will tackle the breakdown of costs depending on the building types throughout the U.S.
Commercial office building
In the U.S., the cost of a single-story office building per square foot averages at $313. Mid-rise office buildings cost about $562 on average, and high-rise buildings are costing about $660.
When it comes to hotel and lodging facilities, different locations have different standards and modes of construction that affect the costs. For example, three-star hotels are cheaper as they cost $478 per square foot, whereas five-star hotels cost slightly more at around $691 per square foot.
Warehouses and Manufacturing facilities
Depending on the type of manufacturing or the use case of the warehouse, the prices per square foot vary significantly. The average cost for constructing a regional distribution warehouse is $214 per square foot. A light industrial warehouse is costlier, with the price hovering at about $238. Technology laboratories are more expensive as they average around $635 per square foot.
Healthcare facilities are a necessity in every city, and new facilities are constructed very frequently. The most expensive healthcare facilities are acute care facilities. These cost $888 per square foot. Medical office buildings are cheaper, and they average at around $498 per square foot. Specialty clinics, on the other hand, on average cost about $619 per square foot.
Schools and universities
The backbone of every society lies in its education system. If you are looking to construct either a primary or a secondary school, the cost is about $327 per square foot. This cost takes the average of building elementary, middle, and high schools $295, $325, and $359, respectively.
Universities and other higher education facilities are costlier than grade schools. For example, regular classroom buildings cost around $580, while laboratory buildings cost about $756 per square foot. University buildings cost $596 per square foot, and dormitories are the cheapest for around $322 per square foot.
Retail shopping centers are grouped into neighborhood strip centers and regional malls. They are colossal ad therefore relatively expensive. The average cost of a neighborhood strip center is $371, while the average price of a regional mall is $537 per square foot.
In comparison to all other commercial building structures, parking lots are the cheapest to construct. For example, an underground multi-level parking structure costs about $143 per square foot, whereas an above-ground parking lot costs $71 per square foot.
Public and community facilities
Public and community facilities are among the most expensive structures to build as they serve many people. For example, gymnasiums and recreational centers cost around $403 per square foot. Government administration buildings cost about $591 per square foot, while police stations, on the other hand, cost $580 per square foot. The most expensive public buildings are performing arts centers and museums. These cost around $892 on average.
Commercial construction cost breakdown
There are many factors to consider when it comes to the pricing of any commercial project. The different aspects of the project contribute and cost differently. We took data on the commercial construction breakdown by components from the National Association of Home Builders.
According to the National Association of Home Builders, the cost of constructing the foundation accounts for 11.3% of the total construction costs. This cost includes excavation, concrete fills, backfills, and retaining walls if necessary.
Labor costs in a commercial construction project range from 20% to 40% of the total construction costs. The factors affecting labor costs in a project are the direct and indirect costs. Direct costs are simple to calculate as they include employee wages. Indirect costs include employee benefits, taxes, training, and employee development. Also, depending on the labor burden, labor costs are likely to change.
Material costs specified by the design team, to a great extent, affect the building costs. For example, steel buildings that need a lot of fabrication are more expensive than regular concrete structures. This cost ranges from 17.3% to 25%.
There is anecdotal evidence that shows the zoning where a project is located affects the construction costs. However, cost changes because of zoning are inconsistent, and it isn't easy to gauge how they fluctuate with time and place. Accessibility to materials in highly populated cities is also more difficult compared to suburban areas. That's why a project in New York City can cost almost twice as much as in midwestern towns.
Finish and fixtures
Finishes tremendously drive up the costs. High-grade finishes cost way higher than lower or mid-grade options. Exterior finishes account for 15% of the construction costs. Some of these include walls, roofing, and windows. Interior finishes include insulation, flooring, cabinets and countertops, lighting, and other appliances. These are among the most expensive project costs as they take up 29.1% of the total costs. The cost varies with the type of finish.
Design fees vary significantly depending on the type of construction. The engineering fees range between 1% to 2.5% of the total project costs for small projects. However, as the scope and complexity increase, you may end up forking up anywhere between 4.5% to 16% of the total project fees. These percentages are inclusive of a 20% to 50% contractor markup. As a result, the engineer's fees are the least in a project.
Major systems/ Utilities
Major systems in a project account for electrical installations, plumbing, and HVAC (Heating, Ventilation, and Air Conditioning). There is no fixed percentage for the cost of major systems in a project as the cost varies with the scope and complexity of the project. Except for fixtures, plumbing takes up to 4.3% of the construction costs, whereas electrical installations take up 4.2% of the costs. HVAC takes up an overall of 4.4%, which totals up to 12.9% of the construction costs. The cost of utilities on smaller projects varies, and the average percentage cost in smaller projects is 8.5%.
Different cities have different regulations on building permits. Other factors affecting these permits are the type and size of the project. The costs range between 0.5% to 2% of project costs.
The final step in your project is landscaping. As a rule of thumb, landscaping takes up to 6.8% of the overall construction budget. It includes driveways, cleanups, outdoor structures such as porches, and other outdoor aesthetic features.
Estimating commercial building costs
Construction costs vary from project to project. The prices also differ from one location to another. When estimating construction costs, the key determining factors are the building quality, design and architecture, materials, labor costs, permits, mechanical and electrical systems, and finishes.
For an ordinary construction estimate, the first step is establishing the building class. Commercial building classes range from class A to C. Class A commercial buildings are the highest in quality. After selecting the building class, the next step is calculating the floor area through structural design and architecture. The more complex the architectural design is, the higher the construction cost per square foot will be. After calculating the construction costs per square foot, you should multiply with the floor area to get the total costs. Building costs also depend on labor costs as there is a 2% to 6% striking difference between buildings in the city and those in suburban areas. Therefore, the next step is calculating the labor costs and adding them up to the estimated costs above. Apart from labor costs, there are expenses on materials. Large-scale commercial buildings and complex steel buildings have higher costs because of the quantity of materials needed, cost of the project's materials, and complexity. The other expenses included are the permit fees and the costs of finishes.
There is no straightforward way of arriving at cost estimates, but a good understanding of the variables gives accurate estimates and design pathways.
Frequently asked questions
Whether you are an experienced or prospective commercial building owner, asking the right questions gives you a better perspective to educate and prepare yourself on the expected commercial construction costs. Below are some of the frequently asked questions concerning commercial construction costs.
Who pays for commercial build-out?
Commercial build-out refers to the work done on a building before a tenant moves in to occupy it. They can be big or small renovations depending on the functionality one wants to add to the building. The catchphrase when it comes to the build-out is negotiation. The owner might agree to foot the costs, or the owner might cost-share with the tenant. It depends upon the type of renovation and how they negotiated the deal.
How long does it take to build a commercial building?
A commercial building of 10000 feet takes between 4 to 6 months to build. However, for complex structures of up to 50000 feet, the construction takes anywhere between 8 to 10 months. When the budget is not a constraint, projects that last year-long usually are valued at over 1 million dollars.
Commercial construction is heavily impacted by numerous factors such as location, labor, and materials. It would help if you planned your costs properly to avoid putting the contractor under tremendous pressure during construction. The current construction costs show a growing trend in the industry.