Lack of Demand May Cause Cost Softening by Year-End

Wilkinson says data for podium-style buildings was added to the Kirksey study this year.

HOUSTON—Commercial construction costs were widely expected to come down in late 2015 and 2016—they haven’t declined yet, but the lack of demand should cause some softening before the end of 2016, says Kirksey Architecture . While lower oil prices have caused a slowdown in the local office sector, other markets (regional office, public, healthcare, retail and education) have replaced much of that volume. It’s also uncertain how the current excess of sublease space will affect construction costs for interiors because almost every project must be priced on a case-by-case basis, according to Kirksey Architecture’s 16th annual construction costs update. Scott Wilkinson , AIA, an core and shell office building construction costs expert and Kirksey executive vice president/commercial team leader, tells GlobeSt.com:  “Market conditions in the construction economy are constantly changing. As a service to our clients, Kirksey annually polls leading general contractors to give an update on current conditions. Cost information and the trends reflect market conditions in and around the Houston area. This year we added data for podium-style buildings (office over parking garage) as many developers/owners analyze this option when it comes to tight sites.” Most office projects continue to build pre-cast or cast-in-place garages. The lower cost range examples would typically be for more efficient suburban sites. Small urban downtown and medical center sites with limitations may have higher costs than the study ranges show. The office building figures apply to site, core and shell only, while the corporate interiors costs reference a 25,000-square-foot floorplate. The Kirksey compilation uses several generic building types, with the following findings. One-story flex office buildings are $76 to $82 per square foot and were the same per-square-foot price in 2015. One-story shell buildings are designed to accommodate uses ranging from traditional offices to light assembly, high-technology lab applications. Typical projects are cold, dark shell steel structures with tilt-up concrete skins and punched openings. The cost includes $9 to $13 per square foot for sitework, assuming five spaces per 1,000 square foot in a surface parking lot. Low-rise office buildings are $88 to $101 per square foot, as compared with $88 to $98 per square foot in 2015. These are two- to three-story, larger footprint shell buildings designed with speculative building features. Typical projects are composite steel structures with bar joist roof structures with tilt-up concrete skins and punched openings. The cost includes $10 to $13 per square foot for sitework, assuming four spaces per 1,000 square foot in a surface parking lot. Mid-rise office buildings are $98 to $112 per square foot as compared with $97 to $109 per square foot in 2015. These are four- to six-story 25,000-square-foot footprint shell buildings designed with speculative building features. Typical projects are composite steel structures with pre-cast concrete and glass skins. The cost includes $6 to $9 per square foot for sitework and minimal visitor surface parking. Typical projects have the majority of parking housed in an adjacent parking garage. High-rise office buildings are $109 to $152 per square foot as compared with $109 to $149 per square foot in 2015. Seven stories are $109 to $122 per square foot as compared with $109 to $121 per square foot in 2015. Buildings of 14 stories are $121 to $132 per square foot as compared with $119 to $130 per square foot in 2015. Buildings of 20 stories are $130 to $145 per square foot as compared with $127 to $138 per square foot in 2015. Buildings of 25 stories are $140 to $152 per square foot as compared with $137 to $149 per square foot in 2015. Seven- to 25-story 25,000-square-foot typical shell projects are cast-in-place concrete structures with articulated pre-cast and curtainwall glass skins. The rising cost of concrete may result in some composite steel structures. Those costs include less than $7 per square foot for sitework and minimal visitor surface parking. The majority of parking is in adjacent garages. Podium buildings are $123 to $142 per square foot for a building and $45 to $55 per square foot for parking. The 50,000-square-foot ground level includes a 5,000-square-foot two-level lobbies, 10,000 square feet of amenity shell space, 5,000 square feet of building support spaces, and 30,000 square feet of parking and ramps. Typical projects are cast-in-place concrete structures with curtainwall glass skins for both the office and garage levels. The cost includes $6 to $9 per square feet for sitework. Parking structures are $27 to $46 per square foot as compared with $25 to $43 per square foot in 2015. This includes sitework costs.