Commercial property construction costs have stabilized over the past year, but prices are still higher than pre-COVID. Until recently, there have been a record number of industrial buildings under construction, and while slowing, there is still an active building market. Below is a summary of current industrial building construction and tenant improvement costs for 50,000 to 1,200,000 sq. ft buildings:
Building Size Construction Const. time Office Whse. $/Sq./ft
sq. ft. $/sq. ft. (months) size sf $/sf Evap. A/C
50,000 $130 7 850 295 7.50 8.00
100,000 $95 8 1,000 265 6.00 7.20
125,000 $88 8 1,200 235 6.00 7.00
200,000 $84 9 2,000 210 5.50 6.25
250,000 $74 10 2,500 205 5.50 6.00
800,000 $65 13 6,000 170 4.75 5.00
1,000,000 $55 14 8,000 150 4.50 5.00
The first two columns show the building size and shell construction costs. As you can imagine, the sq. ft. construction cost drops as the buildings get larger. This might show why so many buildings in the 100,000+ size range have been built—50,000 sf buildings have a significantly higher construction cost. A 250,000 sf building is about half the per square foot cost of a 50,000 sf building.
*These prices do not include land costs.
For office tenant improvement construction, the larger the size, the lower the per-square-foot cost. For example, an 8,000-square-foot office costs about half the per-square-foot cost of an 850-square-foot office.
One of the most surprising costs is the small difference between evaporative-cooled and air-conditioning equipment. Evap. cooled space has 6 air changes per hour and air-conditioned space is designed for 80 degrees. At one point the difference is only $.25 per sq. ft., an amazingly close number. Not sure if the extra cost of insulating the walls, ceilings, and dock doors for AC is included, but the cost of maintaining and replacing evaporative cooling equipment is not. With these costs so close, I can see why so many buildings are being constructed with air conditioning.
In addition to building costs, lead times for tenant improvement materials are improving:
Item Time (in months)
Electrical Service Entrance Sections:
3,000 or 3,600 Amp SES: 13
2400 SES 12
Electrical Panel Boards
up to 400A 2
400-1000A 4
1000A & above 5
LED fixtures:
Office: 2
Warehouse: 3
HVAC Rooftop units
Up to 7.5T 2
10.0T to 30.0 T 5
Fire Pumps (for ESFR sprinkler)
Electric or Diesel: 3
Overhead doors:
Sectional or Coiling: 2
Dock Loading Equipment:
Edge of Dock Levelers: 2
Pit Levelers: 3
Metal Joists & Girders: 5
TPO Roofing: 1
Obtaining Electrical Service Entrances (an electrical panel with a meter that connects to power company service) is still a long wait. A year's wait is manageable for new construction but it is a hardship to replace a damaged panel. Developers are pre-buying SES electrical equipment just in case. A spec electrical panel purchase recently helped an owner lease their building. Another option is for building owners to purchase electrical equipment from developers who have canceled projects.
Construction costs are still higher than they were, but component availability is leveling out to normal market times. With record construction over the past few years ending, it remains to be seen if prices continue to fall and component availability continues to improve.
Willmeng Construction Cost Update