Spring Cost Corner – Commercial Construction

Previous page

by Mike Dwyer, Principal

Office to Rental Residential

Construction costs are starting to increase primarily due to the cost of materials.  Material costs from steel shapes to aluminum and copper are seeing year over year increases of 3.5-9.0%.  New commercial construction is starting to see glimmers of hope for a modest recovery, as we said in our last newsletter, but there is still no clear image of the light at the end of the tunnel.

In recent months, we have been engaged to review and monitor a number of conversion projects.  Although many traditional workouts are still being classified as “Special Assets”, there are groups of investors and some lenders who are starting to seize the opportunities of low prices to purchase at below market rates and turn the properties into income producers.

While no conversion or renovation can be considered “typical”, and a cost per square foot cannot adequately give a rule of thumb cost for a renovation, the chart included above is based upon an actual project.  Unit costs can be gleaned from the chart for such items of work as window replacement, renovated interior finishes, and conversion of mechanical, electrical, and plumbing from residential to office, be wary that the scope of any project must be carefully reviewed to ascertain whether the budget is reasonable.  The reference costs are “baseline” costs and must be adjusted for locale.

If you have a specific project you are evaluating and would like a comprehensive cost analysis, please feel free to contact us.

Previous page