The Commercial Construction Process In 10 Steps

Updated On 6 June 2023.

Are you planning to construct a new commercial building but not sure how? We have got you covered.

What is Commercial Construction?

Commercial construction refers to the series of construction tasks involved in designing, renovating, and building commercial structures from the ground up.

These structures include:

• Corporate Offices and Headquarters
• Medical Facilities
• Life Science Laboratories
• Retail and Fitness Centers
• Hospitality Facilities (hotels, lodges)
• Industrial structures (manufacturing units, warehouses, refineries, power plants)
• Institutional Buildings (schools, universities)
• Sports Facilities

Depending on the complexity of the project, several steps fall under the process of commercial construction. From choosing the right location, and acquiring permits to analyzing the constructed building, each step of commercial construction projects requires careful execution.

As a new project owner or developer, it is confusing to plan the perfect chronology and components of the whole process. To clarify your confusion, we have enlisted 10 steps to the commercial construction process and elaborated on the tasks involved in each one.

Let’s understand these steps in detail:

10 Steps of a Commercial Construction Project

Step 1 – Location Search

The first and foremost step in the commercial construction process is finding the right location. In the competitive commercial industry, the location of a business is significant for its success. Seek advice from property agents and real estate experts specializing in commercial properties.

While making a choice, project owners should consider factors such as the nature of the soil, water supply, proximity to certain buildings, accessibility, and demand for the spot. The right zone and a proper zoning plan are equally important. Hire a soil engineer to test for soil contamination and to determine if the building requires piles or not.

During the site selection, ask yourself these questions:

• Will this location maximize future capital gain, return on investment, and regional developmental initiatives?
• Is the site location suitable for the company’s employees and customers?
• Does the land come in the valid council planning zone for the intended activity?
• Are there any noise restrictions for the place?
• Could the size, topography, and ground conditions affect the construction costs?

Step 2 – Planning and Development

Construction planning and development is an influential step to the final outcome of the commercial construction project. Hence, it should be goal-oriented and detailed, anticipating future problems beforehand.

This is where you start searching for general contractors. Introduce the architect, land developer, project manager, and general contractor to each other so they can collaborate. If not then, hire a reputable company that specializes in Design-Build commercial construction services to streamline the process.

At this stage, project owners, commercial construction contractors, and other stakeholders communicate ideas to ensure everyone is on the same page. A good construction plan includes estimated expenses, payment processes, time schedules, designs, and contracts.

The commercial construction budget should outline hard and soft costs. The cost per square foot depends on the size and location of the new commercial building. In the western US regions like San Francisco, Los Angeles, Seattle, and Las Vegas, the average cost per square foot for a single-story commercial building is $378. For mid-rise buildings, it’s $607 and $730 for high-rise buildings. To get accurate estimates, research historical data and prices for similar buildings.

Create a ‘punch list’ to avoid missing important elements throughout the construction.

Step 3 – Financing

So you have set up the budget, but from where to arrange the money? While some project owners have enough savings for execution, the case is not the same for the majority.

Construction loans are commonly used to collect funds for a project. It’s a kind of business loan that covers the costs associated with building or renovating commercial structures. You can utilize this loan to purchase land, hire workers, and buy materials. Commercial construction loans can be availed from banks, credit unions, private lenders, or other financial institutions.

Typically, the lending amount is between 70% and 90% of total commercial construction costs. These lenders will finance as per the loan-to-cost ratio or loan-to-value ratio. Obviously, you will require the lender’s approval and all the major project details from budget to building plan, contracts, and the estimated date of completion.

Money partners can be any partner willing to contribute to the construction project financially like friends, relatives, or investment companies. Money partners can have a casual approach or a structured investment approach.

Step 4 – Pre-design

This is where you ask your architect to rough out the space and determine the building orientation in terms of utility connections. The design phase of the commercial construction process is characterized by four stages. These are feasibility, schematic design, design development, and contractual documents.

Feasibility – The planning team assesses the amenities and requirements of a site through a feasibility study, to find the viability of the commercial construction project. They determine the building size, the use of space, the number of rooms, and their functions. The aim is to align the building orientation with utility connections and development contracts. All these decisions are stated in a Project Inception Document (PID).

Schematic Design – The schematic design incorporates components such as door and window selection, natural lighting, common areas, and private spaces. The team also produces a sketch illustrating the space, materials, colors, and textures. This data will be used during the design development to research the required equipment and materials.

Design Development – This involves research and investigation of the types of equipment and materials needed for building construction. The associated costs of equipment and materials are also calculated.

Contract Documents – The final code-complaint drawings and specifications are packaged in these files. Based on these working drawings, contractors make decisions on whether they want to accept a tender offer or not.

Step 5 – Design

After pre-design planning of the commercial construction process, the team produces a full set of drawings that represent all the project’s specifications. Architects and designers will create official blueprints and building models. Different engineers will be consulted for their specialized work. Engineers need to stay in compliance with codes and make sure the structure has integrity.

These are the various engineers and their designated work in the commercial construction process:

• A Structural Engineer takes the responsibility for building’s overall structure.
• A Civil Engineer takes responsibility for structural design aspects like parking lots, drainage systems, water supply, and other structural connections.
• A Mechanical Engineer oversees the installations of the air-conditioners, heaters, plumbing systems, and elevators.
• An Electrical Engineer creates the electrical design and layout that constitutes the wiring plan, power distribution placement, and electrical installations.
• Structures with 3 or more stories require a Threshold Inspector to conduct structural inspections during the construction stage.

Commercial contractors will then use these drawings, design models, and specifications from the architects and engineers to construct the building.

Step 6 – Bidding

The commercial construction process involves bidding which takes place in parallel to the design stage. Every commercial project needs to put in a construction bid, otherwise, you cannot determine the total cost of the project. Construction bidding is also when the construction tender is publicized to get price quotes from interested contractors and vendors. This process helps you to hire the main contractor for your project.

For successful bidding, elaborate working drawings and bid packages should be sent by commercial construction companies. It should explain exact information like building plans, requirements, schedule timelines, and quantity lists. For best results, request quotes from at least 3 contractors.

Once you receive the quotes, it’s time to compare them and interview each general contractor. Review their track records, referrals, relevant experience, personalities, and staff members before signing the contract.

Make sure you have a well-established construction team including:

Project Manager – Monitors construction operations and point-person of the team.
Superintendent – Manages the project schedule and coordinates the constructional tasks.
Contract Administrator – Deals with contracts.
Field Engineer – Investigates the site conditions and handles the paperwork.

The commercial construction process runs smoothly if the whole team works cooperatively in the development of the project.

Step 7 – Pre-construction

After the bidding process is completed, the pre-construction phase begins when the project team is fully assembled.

The team, along with the contractor will visit the site and conduct a site inspection. They will assess the environmental and soil conditions to minimize the risk of future complications. The collected data is reviewed by the relevant authorities before the actual commercial construction process starts.

Next, a building permit will be obtained by submitting the designs and plans to the building department. The project team has to comply with the corrections and comments made by the department before a building permit is granted.

An insurance policy is also required to safeguard the stakeholders from unpredictable incidents. This policy will accommodate –

• Builders’ risk insurance
• Workers’ compensation insurance, and
• Commercial and contractor general liability insurance

Step 8 – Procurement

In the procurement stage, the general contractor gathers and secures the materials, equipment, services, and labor force required to complete the commercial construction process. Their complexity depends on the project’s size, design, functionalities, readily available resources, and the expected commencement date.

The commercial construction company is responsible for procuring materials that meet the budget and quality standards of the project. Some may even have to meet legal requirements. All the materials have to be arranged on time.

In case the construction work is too big, the main contractor keeps the subcontractors in charge of certain portions of the procurement work. The hiring of laborers and their salaries must be planned to meet the budget.

Step 9 – Construction

It is here that the actual construction takes place.

First, the construction site is prepared. This is done by removing vegetation, excavating the site, incorporating a drainage system, building temporary storage facilities, and arranging essentials such as power, sanitation, and water. An inspection is conducted of the structure, utilities, HVAC, and electrical systems.

Next, a foundation is laid. This is followed by concrete pouring, steel erection, framing, roofing, exterior, and interior works. Then, the building is made more appealing by landscaping the surroundings.

According to the design and functionality of the building, minor processes are added to the construction. The quality control of each step of the commercial construction process is in the hands of the project manager and the official inspector. The stage only ends when the actual construction of the building is complete.

Step 10 – Post-construction

The post-construction starts with meticulous testing. The project owner, the designer, and the contractor conduct a final walkthrough, and a few changes are put forth. A punch list is created to identify incomplete tasks and unsatisfactory components that need to be taken off before official completion.

As the project closes, assets are deactivated, equipment rentals are returned, the worksite is cleaned, waste is managed, and a final inspection is performed by a building official.

Finally, it’s time to acquire the certificate of substantial completion. It is issued only after meeting all the requirements, rectifying the errors, improving the quality, and passing the final inspection. The building will be issued an official inspection and occupancy certificate from the local advisory board.

This means that the commercial construction process has come to an end and the building is ready to be occupied.

Select commercial construction companies offer their clients a warranty period on their construction work, meaning, if you spot any faulty or poorly built areas of the building within this duration, they will fix them for you.

Tips for Successful Commercial Construction

• Hire Quality Professionals – Conduct proper due diligence before hiring reputable architect, general contractor, and project manager who offer exceptional services at reasonable fees.
• Explore Contractor Delivery Methods – Commercial construction companies provide a range of different project delivery methods including, design-build (DB), design-bid-build (DBB), construction manager at risk (CMaR), renovation, remodeling, and others. Choose a suitable delivery model based on how you want to distribute risks and responsibilities of the project’s costs between you and the commercial contractor.
• Develop a Comprehensive Budget – A commercial construction project will always experience surprise costs. Make sure your prepared budget covers all direct, indirect, profit, and overhead costs. Allot 5-10% of your total budget as contingency funds.
• Obtain Necessary Documentation – You should obtain all the necessary government documents, building permits, environmental clearance, and other approvals for your commercial building. Otherwise, it can lead to heavy penalties, fines, or even cancellation of the project.
• Establish a Realistic Timeline – While setting the timeline for a project, clients should consider various aspects such as permitting, inspections, material procurement, and environmental factors. Always keep room for unexpected delays.
• Use Robust Construction Materials – The lifespan of a commercial building highly depends on the quality of its construction materials. An experienced general contractor will procure the most durable, robust materials requiring less maintenance.
• Focus on Energy Efficiency – Constructing an energy-efficient commercial building can save long-term bills and enhance the company’s reputation. Focus on adding sustainable features and design including clean energy resources, insulation, building automation systems, greenery, etc.

Conclusion

Constructing a commercial building from start to finish entails several steps. The key to making the entire project successful is understanding the nuances of the commercial construction process and getting them right. From the initial planning to the final handover to the client, each step is crucial and should be done methodically without any compromises.

For flawless execution, there must be open communication and collaboration between all the professionals to ensure the project completes on time and within budget.

Since commercial construction projects involve multiple complex steps, it’s important for clients to fully realize how each phase contributes to the overall quality of the finished property. It will be a wise decision to partner with an expert contractor that is prepared to overcome any type of challenges and is committed to providing quality commercial construction services. This saves you time, money, and stressful situations.

Work with a Reliable and Experienced General Contractor

If you’re looking for an experienced full-service design-build commercial general contractor, Constructive Solutions, Inc. has handled numerous commercial projects in San Francisco. Our projects range from ground-up construction to large-scale build-outs. Our expert team of dedicated and skillful employees prides itself on prioritizing cost, time, and quality management.

Get in touch with us today to discuss your next commercial project.

FAQs

What’s the difference between commercial and industrial construction?

Although both the terms are used interchangeably, they are different from each other. Commercial construction deals with the development of corporate offices, retail shops, restaurants, medical centers, hotels, etc. while industrial construction entails building projects of factories, power plants, refineries, warehouses, etc.
Know more differences in detail here.

How much is the cost of a commercial construction project in the US?

For a single-story commercial building, the cost of a construction project starts from approximately $301 in the Eastern US, $313 in the Western US, and $237 in the Midwest US region.

How can I estimate the total budget for my commercial construction project?

You can request your commercial general contractor to provide accurate cost estimates based on the project’s scope and complexity. Alternatively, hire an independent professional cost estimator for developing the final cost of your project.

Relevant Resources:

• The Differences between General Contractors and Construction Managers
• 2023 Commercial Construction Cost Per Square Foot in the U.S.