Commercial construction is one of the essential industries in the modern economy. It is a lucrative business with good profit for the contractors with longstanding in the industry. But, it cannot be done by all due to many inherent problems like maintaining the proper cash flow and getting necessary funding during the completion of large commercial buildings.
The companies working in the commercial construction industry should have easy access to vast amounts of cash resources to conduct their business. Even if they do not have cash reserves, they should have access to a healthy credit line. The construction companies undertaking large commercial construction projects are constantly facing a cash crunch due to slow and belated payments.
To keep the cash flow problems within controllable levels, the construction company should have strict control over the construction cost by lowering the cost per square foot for the project to proceed smoothly.
The cost per square foot factor is one of the most important metrics to be taken into account for the successful completion of the commercial construction project. To keep control of the project, the commercial contractor should have more effective ways for financial forecasting and keep their eyes open for any wide variation in the cost per square foot of the construction.
This helps replenish their cash resource and maintain a healthy profit level at the end of the project.
The commercial contractor must have a clear picture of the cost per square foot rate at which they conduct the project. They should not forget the fact that this is the most basic factor that controls and governs the entire project. This varies from one project to another due to the variables that affect the project’s nature, type, and overall cost.
The project’s overall cost determines the cost per square foot and varies widely in different areas of the country and the type of commercial construction activity undertaken.
In this article, let us consider the impact of the average price per square foot in commercial construction projects. We also learn about how much it differs from one project to another depending on the type of project and the commercial building’s location.
In this article, we are going to see the following topics :
Types of commercial construction
The factors that affect commercial construction cost like
- Building type
- Material finishes
- Labor costs
Commercial Constructions per square foot breakdown by region of the country, namely
- Commercial costs per square foot in the Eastern US
- Commercial cost per square foot in the Western us
- Commercial cost per square foot in the US Midwest
- Commercial cost per square foot in the southern us
Breakdown of commercial building cost per square foot based on the building type
- Office space projects
- For the hospitality industry buildings
- Manufacturing facilities
- Construction for the healthcare industry Construction of schools and university buildings
- Public and community facilities
- Construction of parking structures
The challenges faced in maintaining cash flow in commercial construction.
As far as the construction industry is concerned, we can broadly divide the types of construction into residential buildings and commercial construction. Commercial construction includes all types of constructions for commercial purposes other than for residential use.
Some of the common types of commercial projects
- Office buildings
- Supermarkets and Malls
- Schools and universities,
- Construction of sports stadiums,
- Construction for hotels,
- Entertainment centers,
- construction of parking structures etc
In most states in the US, the construction of an apartment building is also considered a commercial project if the multi-family structures have more than 5 dwelling units.
The Factors That Affect Commercial Construction Cost
A commercial construction project is usually extensive and hence influenced by many variables affecting every project phase. These come into play right from the design stage and continue until the commercial project’s completion and influence the construction project’s pricing. The pricing of a commercial project also depends on the location in which it is constructed.
Other factors like the type of the commercial building and the finishes required in them also contribute to the project’s overall cost. As such, these factors have a bearing on the cost per square foot of commercial construction.
Location of the Commercial Construction
It is a well-known fact that the construction project’s location has a heavy impact on the project’s overall cost. In a country, some areas are generally more expensive to build in than other areas. For instance, in the United States of America, a fully crowded city like New York City will be more costly to build a commercial building than in a rural mid-western town.
Though many variables can be attributed to this, the increased cost of labor and other unexpected or hidden cost factors add to the variation in the cost of construction depending on the project’s location. The climate of the region and the precedents that have been set by other buildings in the nearby areas also contribute to the escalation in the cost of the project.
The type of commercial building you are constructing greatly impacts the project’s overall cost with an increased cost per square foot. The cost involved in building a high-rise office building will be more than the cost of building a single-story warehouse due to the
higher costs for engineering planning, site preparation, and obtaining permits and inspections.
The per square foot cost proportionately increases with the building’s size and type as more material has to be moved and taken to the site of the building. All of these contribute to the increase in overall budget with an equally higher reflect the higher cost per square foot.
The materials used in commercial construction are major contributors to its overall cost with costs of their sourcing and transport costs. Hence the type of material you want to use in commercial construction will decide the overall cost with a clear saying on the square foot cost of construction.
If you are constructing a steel structure with extensive fabrication and other related features, it will not be cheap to construct. Especially when you are going for custom-built windows, doors, other features, and equipment, these will steeply increase the overall construction cost with an upward revision of the building’s price per square foot.
Finishes Required In The Commercial Construction
The type of finishes required in the project will have a big impact on the building’s price and must be added to its overall cost.
Before arriving at the square foot cost of the commercial construction, you must know that the $200 per square foot cost of a 3-star hotel will go up to $300 to $350 per square foot in the case of a five-star hotel, and this price increase is due to the type of finish needed in the project.
So, the high-end finishes will raise the commercial building’s cost per square foot rate compared to basic or medium-grade finishing options.
Labor cost is one of the most vital inputs required to complete a commercial construction and will depend on the type and quality of labor required in commercial construction. Due to the necessity for involving a large labor force, you must consider the level of labor availability, the type of labor required for the project, and the customs prevailing in the local labor market.
The existence of labor unions also will decide on the overall labor costs; wherever the labor unions are active, the labor cost increases, thereby making the price per square foot of a commercial consideration go up significantly.
Likewise, in areas with booming construction activities, construction workers will be in demand. The need for additional cost involved in procuring the required labor will be an additional factor that must be taken into account while calculating the cost per square foot of your commercial construction.
Breakdown of Commercial Construction Cost by Region
To arrive at the overall cost and the square foot cost of commercial construction in various regions of the country, you must consider the available data at various places to find out the average cost of commercial construction.
The cost per square foot of commercial construction in different regions of the country in the US
Let us consider Cummins’s US Construction Per Square Foot Data to get the breakdown of commercial construction costs per square foot in different regions of the United States of America.
Commercial construction cost per square foot in the Eastern regions of the US
To calculate the commercial cost per square foot in the eastern region of the US, the prevailing cost in the cities of New York, Boston, Washington DC, and Philadelphia area were taken into account.
For constructing a single-story commercial office building, the average per square foot cost for a high-end commercial office building was found to be $361, but in the case of a low-end construction, the average cost comes to $301 per square foot. In the case of a mid-rise building, it was $719 and $599 for high-end and low-end construction, respectively.
In the case of high-rise buildings, the average cost of a high-end construction stands at $827, while for a low-end construction, it is found to be at $688 per square foot.
In the case of commercial construction like a Supermarket or a Mall with high-end finishes, the cost is $371 while it is $309 for low-end construction. The commercial construction is for a regional Mall; an amount of 554 is the cost per square foot in case of a top-end construction and $461 if the construction is of a lower grade.
Likewise, in the case of 3-star hotel construction, the average cost per square foot is $604 and $489 for high-end and low-end construction, respectively. But on the other hand, if the commercial construction is a five-star hotel, the average cost stands at $871 per square foot for a higher-end construction and $677 for a low-end finishing.
In the case of commercial construction for a school or university building, the average cost per square foot is $381 and $317 for a high-end construction and a corresponding low-end construction.
The cost per square foot in the Western US
To calculate the commercial cost per square foot in the Western parts of the United States, the construction data sourced from the cities of San Francisco, Los Angeles, San Diego, Sacramento, Las Vegas, Seattle, Portland, and Honolulu were used for arriving at the average cost per square foot.
For a single-story office building, the averages stand at $378 and $313 per square foot for high and low-quality constructions and the same per square foot cost for mid-rise commercial buildings standard $607 and $481. But if it is a high-rise building, then the cost rises to $730 for a high-end construction and $557 per square foot for a low-end construction.
For a project for the construction of a neighborhood strip mall, we have the range of cost per square foot at $430 and $261 for high and low-end construction. The figures for the construction of a regional mall are at $575 and $400 per square foot.
For the construction of a 3-star hotel as a commercial project, $545 and $402 are the average per square foot costs in case of high and low-range construction. At the same time, when the commercial construction is done for a 5-star hotel, the averages are $849 and $577.
If the commercial project is for the construction of a school building, the cost per square foot of construction is $341, while a high-end construction for the same purpose stands at $417.
The Cost Per Square Foot For Commercial Projects In US Midwest
To calculate the average cost per square foot in commercial construction, the construction cost prevailing in Denver, Chicago, and Nashville was taken into account.
The per square foot construction cost of a single-story commercial building in US Midwest cities was found to be at $237 for a low-end finished building, while it is $298 per square foot when the construction is a high-end one.
In the case of a mid-rise building, the figures are $556 per square foot and $454 per square foot for a low-end construction. If commercial construction is for constructing a high-rise building, the values jump to $689 and $554 per square foot.
The average cost per square foot rate for a high-end construction of a neighborhood strip Mall is $340, and the construction of a low end stands at $284. For the regional mall, the respective figures are $507 and $423.
When you want to build a commercial building for the hospitality industry, such as a 3-star hotel, the cost per square foot is $400 to $533, while it is $537 to $762 for a 5-star hotel.
At the same time, for the construction of a school building, the average cost for high-quality construction is $292 per square foot, while the same is $242 for low-end construction.
The Cost Per Square Foot In The Southern US For Commercial Buildings
The data from the cities of Dallas, Atlanta, and Orlando were taken to calculate the cost per square foot in the construction of commercial buildings.
In the southern US for constructing a single-story commercial office building, the averages are $238 and $286 per square foot for low-end and high-end constructions respectively. If the construction is a mid-rise building, the figures rise to $569, and $474 as the average cost per square foot in the case of a high-rise building the cost per square foot of a low-end construction is $545 while the same for a high-end construction is priced at $654.
$245 to $294 per square foot is the average range of cost per square foot for construction of a strip mall in the southern regions of the United States while the regional mall construction cost has risen to $439 for a high-end construction while the same for low-end construction stands at $366.
If the project is for constructing a 3-star hotel, the average cost per square foot is $341 to $478 per square foot depending upon the quality of construction. Likewise, for a five-star hotel, the cost per square foot stands at $462 and $683, depending upon the construction’s finish and quality.
In the case of construction of school buildings, $260 to $217 per square foot is the range of average price per foot construction for this type of building.
Cost per Sq. foot in different Regions of the USA
Amounts in $
|Eastern US||Western US||Midwest US||Southern US|
|High End||Low End||High End||Low End||High End||Low End||High End||Low End|
|Single Story Office||361||301||378||313||298||237||286||238|
|Mid- rise builidng||719||599||607||481||556||454||569||474|
|High Rise Building||827||688||730||557||689||584||654||545|
|3- Star Hotel||604||489||545||400||533||400||478||341|
|5- Star Hotel||871||677||849||577||762||537||683||462|
The Cost Per Square Foot Of Commercial Building As Per The Type Of Building Constructed
The cost per square foot in the commercial construction industry varies widely as per the type of building constructed. We are giving the cost per square foot of the construction of commercial buildings as per building type across the US as a whole.
Commercial office space
For building a single-story commercial office space, the cost per square foot stands at $ 313 while the same for a mid-rise office building is $562, and for the construction of a high-rise building, the cost per square foot stands at $660.
For the construction of a commercial building for the hospitality industry, like a three-star hotel, the cost per square foot average cost is $478, while the same for a 5-star hotel stands at $691 per square foot.
For Construction Of Factory Buildings And Warehouses
The price per square foot of this type of construction is $214, and in the case of a light industrial warehouse, the cost rises to $238. If the construction is for a laboratory facility, the construction becomes more expensive and is $635 per square foot.
Healthcare Commercial Construction
If the construction is for the healthcare industry, the cost is higher than other types of construction. Health care is always a big business and for these new facilities with more elaborate finishing is necessary. For this type of building, in the case of a construction of an acute care facility, the average cost per square foot is $888, and for a medical office building, the cost comes down to $498 per square foot. It is $619 per square foot in case of commercial construction undertaken for a specialty clinic.
For Educational Institutions
If commercial construction is undertaken for providing buildings to schools and Universities average cost stands at $327 per square foot. If the construction is for a primary or Secondary School, the averages stand at $295, $325, and $359 per square foot.
If the construction is to provide buildings to higher education institutions, they are a bit costlier than other school buildings. For building standard classroom buildings, the cost per square foot stands at $580, while the laboratory buildings require an amount of $756 per square foot. In the case of an American University admin building, the cost for construction of an office building is $596 per square foot, and dormitories are the least expensive and can be completed with the cost of $322 per square foot.
Cost Of Commercial Construction For Public And Community Facilities
This type of commercial construction is costly to build, and for building entertainment and Recreation centers, the cost stands at $403 per square foot, and police stations can be built at $580 per square foot. The general administration buildings for Government use an amount of $591 is the average cost per square foot of the building constructed.
Among all these, the most expensive of commercial structures are the museums and performing arts centers.
These special types of buildings are constructed at an average cost of $892 per square foot.
For commercial construction, by way of providing parking structures, this can be built at a relatively lesser cost than other types of commercial buildings. The low-grade multi-level parking structure car parking comes around $143 per square foot to build, while the multilevel parking structure can be completed at an economical cost of $70 per square foot.
Like this, the cost of commercial construction expressed in terms of cost per square foot varies with various regions in the country as well as the type of building constructed.
While planning and budgeting for commercial construction, take care of various factors that influence the project’s overall cost and arrive at the real cost per square foot of commercial buildings in the United States.
So, plan the project properly to maintain a healthy cash flow during the construction and avoid putting the contractor under tremendous pressure while executing the project. To overcome the challenges faced at each stage of the project, before the contractors get a significant amount from the project owner, they have to deploy large amounts of cash during the project’s initial stages.
Take care while working on large commercial building constructions and take the construction cost per square foot as the prime indicator of the project cost.