How Do You Estimate the Cost of a Commercial Building?

Estimating the overall cost accurately is critical for commercial buildings. This versatile section of construction covers multiple aspects, such as materials, labor, permits, design, etc. An accurate and reliable estimate is essential to keeping the project within the allotted budget and timeline. 

Reviewing the project’s dimensions and specifications thoroughly will help us devise the right strategies for estimating cost-effectively. 

How Do You Estimate the Cost of a Commercial Building?

Understanding the Scope of the Project

Before moving towards the measurements and calculations to estimate the cost of a commercial building, it is very essential to get a clear picture of the project’s scope to sustain credibility. The following are the aspects to consider: 

• Size of the Building: It is a very potent factor that impacts the project cost directly. Compared to small buildings, large enterprises need more material, labor and associated requirements, contributing to higher budgeting. 
• Building Type: Commercial buildings serve multiple purposes such as office buildings, retail stores like warehouses and restaurants. Every project has a unique preference according to its type differentiating from structural to functional aspects, to estimate the final cost. 
• Location: The geographical location influences all the factors to estimate the commercial buildings costs. Due to increased demand and specifications, it becomes more costly for contractors in urban areas. Unlike this, rural projects are economical, minimizing the need for higher expenses. 

Now, you can step ahead to estimate the cost breakdown of every associated requirement with a better understanding of the project’s scope. 

Note: While understanding the scope and cost factors is important, it’s always better to get professional help for a more accurate and reliable estimate. Our Commercial Estimating Services can save you time, reduce errors, and help you stay within budget.

Breaking Down the Costs

It is beneficial to segment the project into various sections to get a meticulous and detailed estimate of commercial buildings. Here are the main components to simplify the estimation process of commercial building costs: 

a) Material Cost

It is one of the major portions employing the higher percentage of budget share. It includes a wide variety of materials whose price varies over time based on factors like market trends, and accessibility. Here are the most applicable materials for commercial building costs: 

• Concrete and Steel: It is the most utilized material preferred by contractors for commercial structures. With market trends, its cost fluctuates leading to notable changes in the final cost. 
• Wood: Due to its unique structural and functional features, it is often utilized for specific purposes like roofing, finishing and designing purposes. Its cost depends upon the type you are considering for your building. 
• Windows, Doors, and Finishes: These portions give the final touch to your building, affecting the total cost to a greater extent depending on the quality, quantity and design. The customized specifications further elevate the cost estimates. 

It is necessary to reflect on the market trends, client demands and material upgradation before finalizing the cost estimate. The commercial building cost estimate rises as your specifications for a particular material increase like environment-friendly or premium finishes. 

b) Labor Costs

Labor is the prominent factor contributing to the overall cost estimation. Its cost varies on your laborer choices such as electricians, plumbers, carpenters, welders and technicians, you are hiring for your commercial building. The skilled and qualified team charges higher costs as compared to the handymen or local laborers. These are the factors that determine the labor cost mainly: 

• Union vs. Non-Union Labor: Opting for union labor instead of non-union, increases the construction cost due to the extra demand in the market. Being skilled and experienced in their job, offer invaluable services to the construction market. 
• Local Wage Rates: Labor rates change with geographical location. Labourer also charges higher for the targeted regions like restricted or difficult-to-reach areas. 

In the construction industry, the estimation tool for calculating the labor cost is the number of working hours to complete the project. To keep the project budget-friendly, it is important to take project timelines into account. 

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c) Design and Engineering Fees

Architects and engineers are approached to ensure the structural and functional integrity of the building through their innovative and creative designs. Hiring these professionals significantly increases the budget of the project. 

• Architect Fees: Architect fees leverage about 5% to 15% of the total project cost. It may fluctuate from this range depending upon the complexity and intricacy of a respective commercial project. 
• Engineering Fees: To ensure the accurate functioning of all the operative sections of commercial construction, a professional team is contracted including structural, mechanical, electrical, and civil engineers etc. Typically, they charge the framework accordingly. 

As design and engineering fees share a huge portion of the total construction cost, it is preferred to plan it initially to optimize the cost estimation. 

d) Permits and Approvals

Official approval from local authorities is mandatory to proceed with the project which requires charges to ensure smooth and secure business. Following are the various permits to consider: 

• Building Permits: Building permits are regulated to comply with the codes and standards of local buildings. 
• Zoning Permits: These permits are required to ensure that the ongoing project synchronizes with local zoning laws and regulations in the respective area. 
• Environmental Impact Assessments: EIA is necessary to ensure that the environmental impacts of the proposed projects are considered to sustain an eco-friendly environment. 

It is a very critical aspect of commercial building construction costs that can slow down the project otherwise, resulting in increasing the cost estimate of project associates. Location and type of building are the principal factors that determine the cost estimate of permits. 

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e) Contingency Costs

There are always higher chances of unpredictable and unforeseen circumstances in every commercial construction. It results in increased cost estimation due to unintended delays and fluctuating market trends. So, there should always be a space in your budget to cover these expenses. 

It is best practice to allocate about 5% to 10% of the total budget to tackle sudden situations. It ensures the smooth stream of your project as per planning. 

Also Read: Top Estimation Companies in the USA

Methods of Cost Estimation

Let’s explore the methods of commercial building cost estimation and determine which one is most suited for your project. 

Preliminary Estimate (Square Footage Pricing)

It is the easiest and quickest way to follow the square footage pricing model to estimate the cost of commercial building. It is obtained simply by multiplying the average cost per square foot with the total square footage of the project. 

One of the quickest ways to estimate the cost of a commercial building is to use a square footage pricing model. In this method, the total square footage of the building is multiplied by the average cost per square foot. According to the type of construction business, it has the following cost range: 

• Low-Cost Construction:  Ranges from $100 to $150 per square foot
• Mid-Range Construction: About $150 to $250 per square foot
• High-End Construction: Approximate $250 and above per square foot

Although it is a quick method, it does not deliver accurate estimation as it ignores the specific dimensions of the project. 

Detailed Estimate

It is quite effortful but offers accurate cost estimation accounting for all the essentials of the commercial project. It caters to all the components such as material, labor, permits equipment etc, to calculate the exact and accurate cost estimate. 

If you are handling a mega or large project, you can consider this method to ensure profitability and stability. 

Unit Price Estimate

This method is designed to target the specific components of the commercial building. It includes the right estimation of individual units of a project such as electrical or mechanical systems. It is an ideal approach for the contractors to estimate the cost, particularly a small-level project or specific component of the project. For example, estimating the cost of incorporating a electrical work based on per square foot of space. 

Consider Long-Term Costs

With these short-term cost estimates, some factors govern the long-term estimation process setting the baseline of your project. Here are the important aspects: 

• Maintenance Costs: These costs are leveraged to maintain the sustainability and stability of the project. The maintenance cost varies with the type of material and system in the building. For example, commercial ductwork installation costs highly but reduces the chances of long-term investment. 
• Energy Efficiency: Building commercial projects by applying energy-efficient tools and strategies requires a huge portion of the budget. It reduces the consistent expenses for operational purposes. Switching towards energy-efficient and renewable strategies is an effective way for a successful construction journey. 
• Taxes and Insurance: Taxes and insurance regulations are the persistent portion, that any vary with the size, location and purpose of the building. These costs cover the huge budget share for the commercial building. 

Conclusion

Estimating the cost of a commercial building is a sensitive aspect that requires a clear and careful understanding of all the project associates including short-term and long-term costs. Choosing the right estimating method that aligns with your project specifications helps you get a good picture of accurate estimates. 

At Unity Estimating, we offer meticulous and detailed commercial construction estimates to keep your project budget-friendly. Let us have our dedicated team to serve you in the right way.