Accompanying this report are tables based on RSMeans’ measures of dollar-per-square-foot construction costs.
This month, the 25 major-city results are for three types of health care facilities – a two-to-three-story hospital, a four-to-eight-story hospital and a nursing home – plus a high-rise apartment building, eight to 24 stories tall.
Ranking by expense
The differences in costs between some of the structure types set out in the accompanying table and graphs are significant.
Most expensive to build – on a dollar-per-square-footage basis – is a two-to-three-story hospital.
Next costliest is a four-to-eight-story hospital.
As for an eight-to-24-story apartment building, it is quite a bit cheaper to build than the preceding two hospital categories.
But cheapest of all is a nursing home, at about 60% of the cost of a low-rise hospital.
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.
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 and eases back only a little to $370 for a medical facility with a greater story height.
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, Houston and Dallas.
Kansas City, San Diego, Detroit, 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 12% and 16% lower than in high-cost San Francisco.
Portland is nearly one-fifth (-18%) 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 (+73%).
Year over year construction costs
In the latest survey results, RSMeans changed some of the design specifications for its nursing home model.
Therefore, it’s not valid to compare prices on a year-over-year basis in that category.
In the two hospital categories, the year-over-year average percentage change for the 25 cities was about +2.5%. For an eight to 24 story apartment building, the average cost rose slightly more than 5.0%.
By way of comparison, the current rate of inflation in the United States is +3.4%. That was November’s year-over-year change in the all-items Consumer Price Index (CPI).
From highest to lowest, Baltimore, Kansas City and Chicago ranked numbers one through three for year-over-year cost increases among the 25 cities in the latest month.
Atlanta and Washington formed the next rung on the ranking ladder.
Cities with the lowest rates of construction cost increases were San Diego, New York and San Francisco.
The outlook for construction material costs
Heading into 2012, construction costs are being pulled in two directions.
The outlook for the world economy has turned more uncertain. The European debt crisis and all it may mean for credit markets continues to cast a cloud over world growth prospects.
A weaker European economy will also mean fewer export sales by China to one of its main customers, thereby raising doubt that the nation can maintain its traditional (at least over the last decade) double-digit growth rate.
As a result, prices for many commodities are pulling back from their recent highs. Raw resources are, by definition, the ingredients that go into building products. Hence, material costs are being constrained.
However, there are also counterbalancing forces at work. The data on the U.S. economy is picking up faster than many were anticipating. Gross domestic product (GDP), month-to-month employment, initial jobless claims, consumer confidence and retail sales have all been showing improvement.
Holiday sales as represented by Black Friday and Cyber Monday record-level store purchases are putting smiles on the faces of shopkeepers.
Most significant for the construction industry, the housing market has stabilized at the bottom and is, in fact, showing signs of trending upwards. Higher lumber prices, especially given reduced sawmill capacity, are sure to follow.
With respect to non-residential construction starts, the dollar volume so far this year has been +9% compared with the same January-to-November period in 2010, according to Reed Construction Data.
The break-down is non-residential buildings at +12% and heavy engineering at +5%.
2012 is likely to be a year of gradually increasing construction costs, more so on the materials side than labor.
|hospital (2 to 3 stories)||hospital (4 to 8 stories)|
|2011||2010||% Change||2011||2010||% Change|
|15||NEW YORK CITY||425.02||418.49||1.6%||369.90||364.70||1.4%|
|nursing home||apartment building (8 to 24 stories)|
|2011||2010||% Change||2011||2010||% Change|
|15||NEW YORK CITY||265.74||213.55||n/a||294.79||282.79||4.2%|