January 4, 2008

Construction Costs - Reality vs. Wish

When people call me to talk about building a new office, one of the questions I ask is, "How much per square foot have you budgeted for construction?" The answers mostly range from "I don't know" to $50 per square foot, which is way too low for an all-new interior build-out.

My rule of thumb for estimating construction costs is to figure $100/SF or more for interior only projects. If a client budgets for that amount and it comes in under, then we celebrate. For new buildings you can figure $250 per square foot or more.

Florida is one of the most expensive places to build, topped only by California and New York.. The last project I did in Florida, which was completed in the spring of 2007, came out to $125/SF. And that was for a very simple, no-frills design!

When you are planning a new practice you need to be informed on the realities of construction and design costs. People in the midwest and rural areas like West Texas can often get their construction done for less. But just about anywhere on the East Coast or West Coast it's always higher than you thought it would be. I'm hoping that my projects that are going out for bid in the next month or two will come in for less than last year's average. That's because there's less construction going on and more competition among the contractors now at the start of 2008.

You have to keep in mind that we work almost exclusively with clients in zip codes where at least two out of the top five lifestyle groups have a median income of $75K or more. When all the median income figures fall below $50K, we may not be the right design firm for the project. We don't go overboard with expensive finishes, but we do design to high quality standards that perform well for our clients for 15 to 20 years or more. Quality does not come cheap.

The point is you must do a lot of planning and research when it comes to opening a new practice or moving your existing one. Make sure you get realistic average construction cost figures for your area. If you are going into a higher income area that fits our profile, you can call me and I'll tell you what the latest "BWD Construction Cost Index" is.

Don't be discouraged if the numbers don't look like they will work out the first way you try. You may have to look for a smaller space or a place with lower rent. If you want to attract higher income patients, you can't skimp on construction costs, but there may be another strategy you can employ to make your project work.

No comments: