Accompanying this report are tables and graphs based on RSMeans’ measures of dollar-per-square-foot construction costs.
This month’s results are for three law enforcement type structures – a jail, courthouse and police station – and a post office.
The four types of structure could also be categorized as institutional or public in nature.
Ranking by expense
Most expensive to build – on a dollar-per-square-footage basis – is a “typical” jail. This shouldn’t be surprising, given the security needs of a detention center.
Similarly, a police station has additional requirements relative to a normal (e.g., office) building and it’s the second most expensive to construct among the four structure types highlighted in this report.
A courthouse ranks third, with a drop of nearly one-third in cost relative to a jail. For example, nearly $400 per square foot for a prison in New York falls to about $280 for a courthouse.
Among the four structure types examined in this report, a post office is the bargain. In fact, the charge per square foot to build a post office is less than half what it costs to build a jail.
Comparisons with other types of structure
According to RSMeans, the cheapest types of structure to build, after extremely low-cost parking garages, are factories and warehouses.
A convenience store also belongs in this low-expense grouping.
Department stores and movie theatres are a little pricier.
In the mid-range for construction costs are nursing homes, office buildings, hotels and high-rise apartment buildings.
In the latter three categories, heights above ten stories tend to lower the dollar-per-square-footage cost.
Also in the mid-range for construction costs are elementary and secondary schools, along with institutions of higher learning. (This is also where a post office would appear.)
By far the most expensive types of structure to build are hospitals, jails/prisons, courthouses and police stations.
Some of the foregoing institutional building categories exceed $350 per square foot in the largest urban centers.
In New York, for example, the cost of a low-rise hospital exceeds $400 per square foot.
New York is the most expensive; cities in the South are least expensive
New York has the highest dollar-per-square-foot construction costs in the country.
San Francisco, Boston, Chicago and Philadelphia hold the other four positions in the Top Five among major U.S. urban centers.
Relatively low-cost cities are mainly in the southeast and south-central. Included are Miami, Atlanta, Phoenix, New Orleans, Houston, Dallas and Winston-Salem.
Kansas City, Detroit, San Diego, St. Louis, Pittsburgh, Portland and Cleveland are situated in the middle among the 25 cities set out in the tables.
Washington, Denver and Baltimore are in the low mid-range.
Minneapolis is the nation’s sixth most expensive construction-cost city. Los Angeles and Seattle on the West-Coast are in the upper mid-range.
Along the Pacific shoreline, dollar-per-square foot construction costs in Los Angeles, Seattle and San Diego are between 13% and 17% lower than in high-cost San Francisco.
Portland is nearly one-fifth (-19%) less expensive than the City by the Bay for building projects.
Some other city comparisons
In some other city comparisons, it costs 32% more to build in Chicago than in Atlanta and there is a 27% differential between higher-cost Philadelphia and lower-cost Miami.
The mark-up in New York, the most expensive city among the 25 shown, and Winston-Salem N.C., the least expensive, is nearly three-quarters (+74%).
Year over year construction costs
The year-over-year average percentage changes for the 25 cities shown in the tables and graphs moved in a narrow band from +3.1% for a police station to +4.0% for a post office.
The 25-city year-over-year average cost increase for a jail was +3.2% and for a courthouse, it was +3.4%.
By way of comparison, the current rate of inflation in the United States is +2.9%. That was February’s year-over-year increase in the all-items Consumer Price Index (CPI).
The run-up in construction costs, year-over-year is currently exceeding the change in the overall price level in the country.
From highest to lowest, New Orleans, Kansas City, San Francisco, Detroit and Denver ranked numbers one through five with respect to year-over-year cost increases among the 25 cities in the latest month.
Pittsburgh, Phoenix, Atlanta, Washington D.C. and Winston-Salem formed the next rung on the ranking ladder.
Cities with the lowest rates of construction cost increases were Boston, Chicago, SanDiego, Minneapolis, Philadelphia and Portland.
The outlook for construction costs
The upward pressure on U.S. construction costs is being restrained by several factors.
Chinese authorities have downgraded their expectation of growth this year to about 7.5%. While that is still an impressively strong number, it will fall short of the double-digit percentage increases (+10.0%-plus) of the past six or seven years.
China has been accounting for 40% of world raw materials demand. If China’s surge is dialed back to a jog or a stroll, the contribution of commodities to construction material costs will be muted.
There are two exceptions to this scenario. Even tepid world growth is causing an increase in the global price of oil. Furthermore, ongoing tensions with the Arab word – on account of Iran’s nuclear ambitions, the uprising in Syria and even such rogue actions as the shootings in Toulouse France – continue to add a risk premium.
Lumber is also a potential source of upward price volatility, depending on how quickly and to what degree the U.S. housing market recovers. For the moment, at least, it appears that residential ground-breakings will pick up only gradually. Eventually, however, the reduction in lumber availability on account of sawmill closings will present a problem.
In non-residential construction markets, government austerity measures will hold back capital expansions by the public sector. Private sector projects will see a cyclical pick-up, especially given that interest rates are so low. Rigorous credit approvals are still a drawback, but many firms are sitting on sizable profit nest eggs.
Capacity utilization rates are improving, but they are still not at levels that would demand major expansion programs. According to the Federal Reserve, both total industry and manufacturing have current usage rates that fall below 80%. Above 85% is a good benchmark for determining when firms will feel the need to expand.
As for the labor situation, the unemployment rate in construction remained high in February at 17.1%. But that was a solid improvement versus the jobless rate in the same month of last year, at 21.8%.
|jail||courthouse (2 to 3 stories)|
|2012||2011||% Change||2012||2011||% Change|
|15||NEW YORK CITY||391.31||378.79||3.3%||278.35||269.00||3.5%|
|police station||post office|
|2012||2011||% Change||2012||2011||% Change|
|15||NEW YORK CITY||321.11||311.29||3.2%||184.55||177.35||4.1%|