PUBLISHED BY GLOBAL SERVICES
LEAD AUTHOR: STEPHEN DENNIS, ACCOUNT EXECUTIVE
STOBG GLOBAL SERVICES
Construction Cost Report
Corporate Interiors Market Data | October 2024
Abstract
STOBG actively engages with regional construction professionals to monitor cost and construction trends as they develop and seeks to inform and engage with others in the commercial real estate industry so that we may all better understand the daily reality of our markets. Through our global network of operating companies and Strategic Alliance Partners, STOBG collects and analyzes data from actual projects across our geographic platform to generate timely reports that represent the market as it stands. This pricing data is captured from a variety of actual projects, and not standardized benchmarks; it is intended only to inform and advise and not for specific planning purposes. For more nuanced information, Global Services can help facilitate project-specific conversations with local estimating professionals.
STOBG US OFFICE LOCATIONS
Atlanta, GA Irvine, CA
San Diego, CA
Augusta, GA Jacksonville, FL San Francisco, CA
Austin, TX Lihue, HI
San Jose, CA
Bala Cynwyd, PA Los Angeles, CA Sarasota, FL
Boise, ID Mountain View, CA Seattle, WA
Boston, MA Nashville, TN Stamford, CT
Charleston, SC New York, NY Tacoma, WA
Dallas, TX Orlando, FL (2) Tallahassee, FL
Denver, CO (2) Pasadena, CA Tampa, FL
Fairfield, NJ Philadelphia, PA Windham, NH
Fort Myers, FL Phoenix, AZ Woodbridge, NJ
Gainesville, FL Sacramento, CA
Honolulu, HI Salt Lake City, UT
Houston, TX San Antonio, TX
STOBG INTERNATIONAL OFFICE LOCATIONS
Calgary, Canada Toronto, Canada
Edmonton, Canada Vancouver, Canada
Kitchener, Canada Dublin, Ireland
Ottawa, Canada London, United Kingdom
Methodology
The following data represent median construction costs from actual projects under construction as well as recently procured interior fit-out projects spanning between Q1 and Q2 2024 by our family of builders within these specific locales. The data are normalized to an assumed 30,000 USF commercial interiors project in a central business district.
‘High End’ values are assumed as Class A buildings with all MEPS run from a building core and include finishes such as stone flooring, specialty lighting, and veneer casework.
‘Medium End’ projects are assumed to be Class A/Class B new interiors within existing buildings, reuse existing perimeter heating, and more accurately reflect region median construction values.
‘Low End’ projects are based on building standard spec suites, Class B buildings, or projects that include higher levels of reuse of prior finishes, partitions, and MEPS.
All pricing includes General Contractor Fees and Staffing and assumes a Q3-2024 construction start (no escalation is included). Pricing does not include: design or consultant fees, commercial kitchen equipment, FF&E, Security, AV and other Low-Voltage infrastructure, or any work outside of tenant interior space such as site work, foundations, roofing, fenestration, or building superstructure.
STOBG understands that office design is an extension of an organization’s brand, values, and culture and that the spectrum of possible materials and inspiration changes and grows every day. Our indexing deliberately excludes ‘Showcase’ and other significantly high-value spaces to prevent the skewing of average values.
We hope this bulletin helps you understand the current cost trends and strategically plan your company’s growth into the upcoming quarters.
FIGURE 1: The graph above represents average key trade cost breakdowns across major markets in the United States, Canada, London, and Dublin through Q2-2024. As raw material escalation has eased since 2023, the availability of skilled labor, economic and political uncertainty, and the desire to build backlog remained the primary drivers for construction hard costs in the first half of 2024. Due to Electrical, Carpentry, and HVAC costs accounting for roughly 50% of all hard costs, our team advises tenants review existing infrastructure and code requirements as part of their site selection and due diligence.
* GST/HST tax not included.
† Due to restrictions in the labor market these regions are experiencing higher variability in project values at all levels. Engaging with a local professional is highly recommended prior to preliminary budget and schedule forecasting.
1 Costs are in local currency.
FIGURE 2: The graph above represents the typical range of costs of commercial tenant interior construction across major cities in North America, as well as select international markets spanning from Q1-Q2 2024. The latest data from Q2-2024 indicate that not only has the rate of construction escalation slowed in the past year, but there is also reduced volatility in pricing as well, with most markets reporting flat, or only modest, changes in cost.
Responses from the Mid-Atlantic region suggested that economic and political uncertainty led to a temporary decrease in cost due to aggressive bidding and the desire to build backlog; costs are projected to normalize over the balance of the year. The Mountain Region, which has traditionally been an isolated market, is experiencing increasing demand for high value projects and spaces, therefore average costs have continued their rising trend since the first quarter.
The latest data from Q2-2024 show that construction escalation has not only slowed over the past year, but pricing has also become less volatile.
* GST/HST tax not included.
† Boston, New York, San Francisco, and Palo Alto exhibiting large ranges in high finish costs; refer to following tables for more information.
1 Costs are in local currency.
REGIONAL COST BREAKDOWNS
COST PER USABLE SQUARE FOOT
TRADE-SPECIFIC BREAKOUT COSTS
Conclusion
In 2024, commercial interiors construction costs across our measured cities have largely stabilized, with small increases and decreases attributed to local and natural fluctuations rather than indicating broader trends.
It is important to note that project value is determined by more than just the cost of labor and materials; what is being designed, where, and how it’s being installed are significant as well. Leasing activity has also been largely flat in Q1-Q2 2024 but is projected to increase in the following quarters.1 With new Class A properties experiencing the highest absorption rate2, and tenants increasingly looking for the latest amenities, it’s likely that future tenants will be simultaneously cost-aware and demanding when considering finishes, occupant density, and location. To mitigate such risks, it’s increasingly recommended that tenants bring contractors into the discussion during site and lease review to identify nuances and costs associated with different properties.
Skilled labor continues to be a sore point in both direct construction costs as well as the impact on project duration. As the construction industry continues to compete over new labor to replace the retiring workforce, the projection is that the value of labor will be a driver in overall project value for the years to come.3
As 2024 still has its share of economic and political uncertainty ahead of us, STOBG does advise ongoing and robust due diligence in sourcing and vetting capable, qualified, and reliable trade partners. STOBG has pioneered and rigorously upheld an industry-leading prequalification process which remains our primary tool to help our clients manage risk and uncertainty.
1 Bitner, D., Mazur, J., Reichert, K., (2024). Newmark. United States Office Leasing House View. https://www.nmrk.com/storage-nmrk/uploads/documents/2Q24-Newmark-UnitedStates-Office-House-View-FINAL_EXTERNAL.pdf
2 Romero, S., Tribble, E., Smith, D., (2024). Cushman & Wakefield. Office Fit Out Cost Guide 2024. https://cushwake.cld.bz/americas-office-fit-out-cost-guide-2024
3 U.S. Bureau of Labor Statistics. (2024). Occupational Outlook Handbook: Construction and Extraction Occupations. https://www.bls.gov/ooh/construction-and-extraction/
About STOBG Global Services
STOBG Global Services acts as a central hub, connecting our clients to our family of builders and Alliance Partners. Through our efforts, we are able to harness the knowledge and resources of their local markets and provide our clients with thorough and expert construction and consultation services throughout the United States, Canada, UK, and Ireland. Working with us, our clients benefit from over 125 years of experience in the construction industry.
Stephen Dennis
Account
Executive
STOBG Global Services
Stephen.Dennis@stobuildinggroup.com
646.584.8476
Roger Saleeby
Senior
Vice President
STOBG Global Services
Roger.Saleeby@stobuildinggroup.com
646.300.3640