Commercial construction projects encompass a wide variety of planning, materials, permits, and workforce talent fees. When reviewing what goes into construction costs, a thorough budgeting process includes hard costs, soft costs, and site costs.
Planning for Hard Costs in Commercial Construction
Hard costs account for the physical construction of a project. These include the price of structural materials, doors, windows, insulation, HVAC systems, mechanical, electrical, and plumbing services. Hard costs should also include any equipment rental fees as well estimated labor costs.
Estimating Soft Costs for Commercial Construction
Soft costs are equally important when estimating project costs. The most common of these costs are:
- Permit and certification fees which involve zoning, electrical, mechanical, plumbing, environmental, LEED certification, and others.
- Insurance fees in addition to general liability insurance, might be required by local regulations to include special policies for builder’s risk, and potential weather hazards. A separate policy for materials that are purchased, but not installed, might also be needed.
- Blueprint drafting and review payments to architects, engineers, and designers.
- Interest fees and taxes.
Commercial Construction Site Costs
In addition to land costs, site costs include any preparation work required on the site prior to the start of construction. Site preparation may include the cost of excavation, demolition cost, and foundation issues.
Plan for Unforeseen Costs
Despite best laid plans, at some point during the building process, unforeseen costs arise with every project. Some of these costs can be anticipated by thoroughly reviewing government building codes, fire codes, and environmental restrictions with the commercial contractor to ensure that designs account for all of these prior to the start of construction. If it is a remodeling or expansion project, existing conditions are often the source of surprise costs. Many existing conditions such as non-working HVAC systems, problems with existing electrical wiring or layers of previous finishes hidden by the current finish aren’t readily visible until construction has already begun. Or a contractor pulls up the carpet in a room and finds asbestos, or tears out a wall revealing a structural column or pipes interfere with the redesign. These things could result in extra costs for removal or redesign depending upon the circumstances.
When reviewing what goes into construction costs, the keys to successful budgeting include familiarizing yourself with all relevant government and environmental building codes; understanding which line items are necessary and which are flexible, and adding a five percent contingency allowance in anticipation of unforeseen costs. Constant communication throughout all stages of a commercial construction project is vital to keeping a project on track and in budget.
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