Accompanying this report is a table based on RSMeans’ measures of dollar-per-square-foot construction costs. The results for 25 major cities are shown for four health-care/residential types of structure.
Means has recently altered specifications with regard to its costing models. Therefore, in many cases, it is not valid to compare this year’s figures with last year’s to determine percentage changes.
Ranking by expense
Among the four property categories set out in the table, it is most expensive to build a two-to-three-story hospital. The dollar-per-square-foot cost drops 12% for the next most expensive type of structure, a four-to-eight-story hospital.
Third among the four structure types – at about two-thirds the cost of a low-rise hospital - is an eight-to-24 story apartment building.
Least expensive to build is a nursing home. In fact, the dollar-per-square-foot cost of a nursing home is only slightly more than half the cost of building a two-to-three-story hospital, the most expensive structure type among the four categories.
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 office buildings, hotels and high-rise apartment buildings. Heights above ten stories tend to lower the dollar-per-square-footage cost.
Also in the mid-range for construction costs are institutions of higher learning, along with schools at the elementary and secondary levels.
By far the most expensive types of structure to build are hospitals, jails/prisons, courthouses and police stations. Some of these exceed $350 per square foot in the largest urban centers.
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 areas.
Relatively low-cost cities are mainly in the southeast and southwest. This includes Miami, Phoenix, Atlanta, Houston and Dallas.
New Orleans is also low cost. All of the restoration work in that city since Hurricane Katrina has apparently been achieved without a big run-up in costs.
Detroit, Kansas City, St. Louis, Pittsburgh, Portland and Cleveland are situated in the middle among the 25 cities set out in the table. Washington, Denver and Baltimore are in the low mid-range.
Minneapolis is the nation’s sixth most expensive construction-cost city. Los Angeles, Seattle and San Diego are a West-Coast tier that is 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 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 now costs about 31% more to build in Chicago than in Atlanta. The relationship is almost the same (+27%) 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 more than three-quarters (+76%).
The outlook for construction costs
Enormous excess capacity in residential markets continues to keep construction costs in check. Lumber prices have occasionally rallied over the last several years, only to fairly quickly fall back asleep. In non-residential markets, stimulus money for civil projects is winding down but private sector funding for commercial work is beginning to re-appear.
The biggest threat with respect to material costs lies in commodity price movements. Emerging market demand for base metals and energy has driven up prices for copper and oil (over $90 USD per barrel). Either as inputs or heating/transportation sources, these are essential ingredients in the production process for many building products.
In a somewhat ironic turn of events, rapid inflation in the developing world may serve to keep a check on commodity prices. Monetary measures (i.e., higher bank reserves and hikes in interest rates) are being enacted in China and elsewhere in the Asia Pacific region to slow down growth and ward off the danger of asset price bubbles.
Acting against this restraint on commodity prices have been some recent severe weather fronts threatening exports of key raw materials. Torrential rains in Australia and Brazil have been the highest profile examples. Coal and iron ore supplies are the subject of speculation and steel prices have demonstrated they can easily go on a roller coaster ride.
(2 to 3 storIES)
||HOSPITAL (4 to 8 storIES)|
|2010||2009||% Change||2010||2009||% Change|
|15||NEW YORK CITY||418.49||382.20||n/a||364.70||347.56||n/a|
|nursing home||apartment building (8 to 24 stories)|
|2010||2009||% Change||2010||2009||% Change|
|15||NEW YORK CITY||213.55||197.86||n/a||282.79||273.26||n/a|