“Why does it cost so much more than I expected?” If you’ve asked yourself this while embarking on a construction project, whether or not you were star-gazing at the time, you’re not alone in the universe. Your wildest imagination has already brought your building project design far beyond bare bones plans, but as it turns out, the bare bones are both necessary and expensive. It’s frustrating to have to spend so much money for features you didn’t anticipate, especially when it’s so much more than anticipated.
Before you move on space acquisition or design, we recommend embracing the facts and interconnectedness of market conditions and regulations, and integrating these absolutes with wants and needs early in the planning process:
Project Orchestration includes, but is not limited to, “tracking work crews, owners, vendors, supplies, bids, job changes and corrections, and the money flowing among them all,” not to mention the one calendar to rule them all, (DiStefano).
Material & Equipment Costs reflect the buyer’s role in selecting and purchasing the building materials, but will also encompass equipment rental and/or depreciation costs.
Supply & Demand as it relates to today’s labor shortage. “The majority of the increase [in construction costs is] coming from increased labor costs. With labor shortages, projects take longer and bid contracts also become more expensive,” (Borland)
Statutory Processes like mandatory code compliance, permitting hurdles and time delays due to flooded building department conditions drive costs up and timelines out.
We’ll dive deeper into some of these market conditions another time, but here’s a fun hypothetical in terms of how these factors will affect the price tag of your project (to be read in your best LaFontaine voice): In a parallel universe where permits are not required, code compliance is non-existent, construction opportunities are in short supply, and payroll taxes, and insurance don’t apply, you could complete a restaurant build for $100k. In our universe; $500k… how aggravating!
Our tips for reducing the impact of market conditions on your budget:
- Find a building/space as close to being already built out for your business as possible.
- Opt for the newer building, it will require less work to bring it up to and maintain code compliance.
- Leasing? It isn’t always the landlord’s responsibility to keep up with code or bring parts of the building up to code, so make sure you know your lease terms.
- Engage a qualified contractor in value engineering before (yes, BEFORE!) design takes place. Find out why your Design-Build General Contractor should be the first person on site.
- Avoid unconventional building methods, MEP, and design. We HATE to say this and potentially stifle any creativity, but generally, the more customized the design of your space, the larger the bill.
- Prefabricated materials from fixtures to building elements, pre-built can reduce design and labor expenses.
- Establish realistic expectations about scheduling permitting and construction. Don’t sign a lease in a rush with a short time-frame before rent starts and then wind up paying higher rates for accelerated services.
- Call a conscientious company that’s dedicated to helping best position your business in the construction process and advocate for YOU.
Resources:
APSGC: Engaging a General Contractor During Due Diligence (And The First 5 Things to Assess)
APSGC: Evaluating Hidden Costs on Your Commercial Property
APSGC: Open Your Restaurant for Under $200K
APSGC: The TI Permit Process: Avoiding Scope Creep
Article: Construction Orchestration by Joseph DiStefano
Article: Severe Labor Shortage COntinues to Plague Construction Industry by Kelsi Maree Borland
