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 public sector building types – three law enforcement structures and a post office.
Ranking by expense
There are big differences in costs between the four types of structure set out in the accompanying table and graphs.
On a dollar-per-square footage basis, it is most expensive to build a “typical” jail. The security features required to house the criminal element places prison construction among the most pricey of all types of structure to build.
There’s an almost 20% drop in cost to build a police station. A further 15% decline will finance a courthouse. The three structure categories considered so far are in the law enforcement arena.
The fourth type of structure, a post office, is a return to more normal building design and costing. The construction cost per square foot of a postal facility is less than half that of 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 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, Atlanta, Phoenix, 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.
Kansas City, St. Louis, Detroit, 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 33% more to build in Chicago than in Atlanta. There is a 28% 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
For the 25 cities considered, the year-over-year (i.e., March 2011 versus March 2010) average changes in costs were as follows: a post office, +2.3%; police station, +1.6%; jail, +1.4%; and courthouse, +1.0%.
Chicago has experienced the greatest year-over-year gains in construction costs, ranging from +3.6% for a post office to +2.3% for a courthouse.
Baltimore is in second position among the 25 cities for fastest year-over-year percentage increases, with Pittsburgh, Kansas City and St. Louis rounding out the Top Five.
New York, where the actual dollar-per-square-foot cost is the highest, currently stands near the bottom of the pack (in 20th position) for year-over-year change in cost.
The outlook for construction costs
There are many reasons to expect a push from construction costs over the next couple of years. For example, in the forestry sector, lumber prices have been restrained on account of the unprecedented downturn in U.S. housing starts. This situation will gradually alter.
In Canada, the lumber industry has raised its capacity utilization rate above 90%. That’s a formula for rapid price increases once demand picks up. While the high usage rate is partly due to sawmill closings, forest industry executives have also been aggressively expanding sales in emerging markets, particularly China. And rebuilding efforts in Japan are sure to lead to an increase in orders.
Emerging market dreams of immense and economy-transforming infrastructure projects have been leading to increased demand for all manner of raw materials. Now that the world recession has ended, this will continue to exert a general upward bias on iron ore, steel, cement, aluminum and base metal prices.
The cost of fixing the earthquake/tsunami damage in Japan has been estimated at $200 to $300 billion (U.S. dollars). This can only add to the global demand for scarce raw materials. An interesting and critical question is whether or not China will forego some of its natural resource requirements to lend a helping hand to its neighbor.
Current political unrest in the MENA (Middle East and North Africa) nations is adding a significant risk premium to the price of oil. No one can say with certainty how long the turmoil will last nor how wide-sweeping its effects will be. The “doubt” factor is likely to keep oil prices at their new elevated level or higher for a long time.
Applying a measure of caution, residential and non-residential construction costs can be expected to increase by at least 3% to 5% annually over the next several years. Higher prices for some commodities will eventually lead to substitutions and/or expanded supply, but those days still appear to be some ways away.
||courthouse (2 to 3 storIES)|
|2011||2010||% Change||2011||2010||% Change|
|15||NEW YORK CITY||378.79||375.28||0.9%||269.00||267.46||0.6%|
|Police station||post office|
|2011||2010||% Change||2011||2010||% Change|
|15||NEW YORK CITY||311.29||307.56||1.2%||177.35||174.06||1.9%|