Commercial construction can be a lucrative business, but it’s not for the faint of heart. Companies working in the commercial industry need to have plenty of cash in reserve or easy access to a healthy credit line. Between commercial construction being so cash-hungry and notoriously slow payments, contractors need to have a laser focus on their construction cost per square foot.
The cost per square foot on a commercial project can vary quite a bit from one project to another. This is especially true when you compare the costs of commercial projects in different areas of the country, as well as the types of commercial buildings.
Let’s take a look at the average price per square foot in commercial construction, and learn about how much it can differ depending on your project and its location.
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Types of commercial construction
Commercial construction includes a wide range of building types. Essentially, commercial construction boils down to almost any project that isn’t purely residential in nature.
Common examples of commercial projects could include office buildings, malls, schools and universities, sports stadiums, hotels, entertainment venues, and parking structures.
Even apartment buildings, full of residential spaces, are considered commercial projects. Most states consider residential projects as single or multi-family structures under three or four units. States generally consider structures outside of that scope as commercial construction projects.
Factors that affect commercial construction costs
Many factors come into play when pricing out a commercial project. You have to understand the difference in locations, materials, and labor can have a huge impact on the cost per square foot. The types of buildings and finishes included will also undoubtedly reflect in the total building cost.
Some areas of the country are just generally more expensive to build in. For instance, a highly desirable area in a crowded city will be more expensive to build in than a less populated area. A project in NYC can cost more than twice as much as the same project in a small midwestern town. While some of this is due to the cost of labor, much of it just has to do with the climate and precedents set by other buildings erected in the area.
The type of building you’re constructing definitely impacts the cost per square foot. For example, a basic single-story warehouse will cost much less per square foot than a high-rise office building. The high-rise will have much higher engineering and planning costs, site prep, permits and inspections, and logistical costs, all of which contribute to the cost per square foot.
It will also have different structural needs, which we’ll get to next.
The materials specified by the designer have a lot to do with a building’s cost to build. A steel-structured building that requires extensive fabrication won’t be cheap to build. Also, custom-built windows and doors can quickly drive up the price per square foot.
If you haven’t considered the cost of the finishes, you’re missing a huge piece of the puzzle. The perfect example is the consistent $200-plus per square foot jump in price between three-star and five-star hotels. High-end finishes will drive the cost per square foot up tremendously over builder-basic or mid-grade options.
One of the most significant factors in the cost of building per square foot is labor. In areas where unions are popular, the price per square footage will be significantly higher than it would be in non-union regions.
In areas experiencing booms, workers will expect to be paid quite well — or they’ll jump ship to the next contractor that will pay their price.
Commercial construction costs per square foot: Breakdown by region
If you’re wondering how the costs per square foot stack up against each other in the different regions, this next section is for you.
We’ll break down the average cost for a commercial project per square foot in the East, West, Midwest, and South in the United States.
Commercial cost per square foot in the Eastern US
Using figures from New York City, Boston, Washington DC, Philadelphia, and the Raleigh-Durham area, we’ve come up with the average cost per square foot for commercial projects in the East.
On average, the cost to build a single-story commercial office building on the high end is $361 per square foot. On the low end, the average cost is $301 per square foot. For a mid-rise building, the numbers jump to $719 and $599, respectively. High rise buildings jump a bit more, with a high average of $827 and a low average of $688 per square foot.
A standard neighborhood strip mall’s cost per square foot averages at $371 per square foot on the high end and $309 on the low end. A regional mall’s top-end average is $554 per square foot and $461 for a bottom average.
For a three-star hotel, your high and low average costs per square foot are $604 and $489, respectively. Bump that up to a five-star hotel, and you’re looking at $871 per square foot on the high side and $677 on the lower end.
When it comes to elementary, middle, and high school construction, the average cost per square foot on the high end is $381, while the low end comes in at $317.
Commercial costs per square foot in the Western US
The average cost per square foot in the West is the result of samples from San Francisco, Los Angeles, San Diego, Sacramento, Las Vegas, Seattle, Portland, and Honolulu.*
Single-story commercial office buildings in the West average $378 per square foot on the high end, and $313 for the low end. Mid-rise commercial buildings average $607 for a high, and $481 for a low. High-rise buildings cost an average of $730 on the high end, and $557 per square foot on the low end.
A neighborhood strip mall in the west will cost $413 for an average high and $261 for an average low. Regional mall highs and lows are $575 and $442 per square foot, respectively.
If you’re building a three-star hotel in the west, average costs will be $545 at the top of the range and $402 for the low average per square foot. Make that a five-star hotel, and your high average will be $849 while the low comes in at $577.
For education K-12 school buildings, the average cost per square foot in the west is $417 on the high end and $341 on the low side.
* Note: The cost of construction in Honolulu can drive the average cost per square foot up significantly. The difference is $10 per square foot more in the case of the average price to build a hospitality building.
Commercial costs per square foot in the US Midwest
The building climates in the Midwest vary quite a bit, but these averages are from samples in Denver, Chicago, and Nashville.
If you’re in the commercial office building business, constructing a single-story commercial building will average $298 per square foot on the high end and $237 for the low average. Building a mid-rise building will average $556 per square foot for a high in the Midwest and $454 on the low. High-rise buildings jump a bit more, with a high and low average of $689 and $554 per square foot to build, respectively.
A basic neighborhood strip mall has a high average cost per square foot of $340 and a low of $284. Those numbers jump to $507 and $423 for building a regional mall.
When it comes to hospitality buildings, a three-star hotel’s cost per square foot will average $400–$533. You’ll see a respective jump to $537–$762 for building a five-star hotel.
When it comes to a school building, K-12 buildings average $290 per square foot on the high side and $242 on the lower end of things.
Commercial costs per square foot in the Southern US
Examples for the average cost per square foot in the South came from samples of the commercial building climates in Dallas, Atlanta, Orlando, and Miami.
Building a single-story commercial office building will cost an average of $238–$286 per square foot. A mid-rise building costs $569 on the high end and $474 on the low end to construct. Building a high-rise will cost a high between $545–$654 per square foot on the low end.
If you’re looking to build a strip mall, high costs average $245–$294 per square foot. Building a regional mall averages $439 on the top end and $366 at the average bottom price per square foot.
Building a three-star hotel will between$478–$341 per square foot. A five-star hotel costs an average of $683 per square foot on the high end and $462 on the low end to build.
Constructing K-12 school buildings in the South will cost an average of $260 per square foot on the high side and $217 for a low average.
Commercial building cost per square foot: Breakdown by building type
The cost per square foot varies wildly between the types of commercial projects you’re working on. We’ve examined the regional variants, but here’s a breakdown of the average cost per building type across the US as a whole.
Commercial office space
If you’re building a single-story office space in the US, your average cost per square foot will be around $313. Constructing a mid-rise office building will cost an average of $562 per square foot. High-rise buildings cost an average of $660 per square foot to build.
As you can imagine, the finishes in hotels can vary throughout the nation, driving a significant range of cost per square foot. However, building a three-star hotel in the US costs an average of $478 per square foot. A five-star hotel costs an average of $691 per square foot to build.
Warehouses and manufacturing facilities
Prices per square foot to build warehouses and manufacturing facilities often vary based on what the facility will be storing or making.
However, building a regional distribution center will cost an average of $214 per square foot. A light industrial warehouse will cost an average of $238 to build. Tech laboratory facilities are much more expensive to build, with an average cost per square foot of $635.
Healthcare is always big business, and new facilities seem to pop up all the time. Acute care facilities are expensive to build, costing an average of $888 per square foot. Medical office buildings cost an average of $498 per square foot to build in the US. A specialty clinic costs an average of $619 per square foot to build.
Schools and universities
If you’re looking into building a primary or secondary school building, it will cost an overall average of $327 per square foot. This brings into consideration the elementary, middle school, and high school averages of $295, $325, and $359 per square foot, respectively.
Building higher education facilities is much more expensive than constructing grade schools. Standard classroom buildings cost a square-foot average of $580. Laboratory buildings cost $756 per square foot on average to construct. Your average American university admin building costs $596 per square foot to build. Dormitories are the least expensive of the university structures, costing an average of $322 per square foot to build.
Public and community facilities
Public and community buildings can be some of the most costly to construct per square foot.
Gymnasiums and rec centers cost $403 per square foot to build. Police stations cost an average of $580 per square foot to build.
Government administration buildings cost an average of $591 per square foot.
The most expensive of all structure types on our list of commercial structures are museums and performing arts centers, costing an average of $892 per square foot to build.
Compared to the other commercial building types, parking structures are the least expensive to build. A below-grade, multi-level parking structure costs an average of $143 per square foot to build, while an above-ground multi-level structure costs $71 per square foot.
The cash flow challenges of commercial construction
The construction industry puts a significant amount of pressure on the cash flow of its contractors. Fronting cash for projects is the norm, and it can really take its toll on a company. The issue gets even worse when it comes to commercial projects.
While most projects, regardless of size, require a bit of cash upfront from the contractor, some situations are easier to deal with than others. Residential contractors tend to have far less cash out before they start to get paid for their work. Conversely, commercial contractors might have to front millions of dollars to get a project off the ground. Couple that cash with the fact that commercial construction payments are painfully slow, and one missed payment can wreck a company.