How To Estimate Construction Costs For Commercial Buildings

Estimating the cost is crucial during the planning stage of any construction project—whether it’s residential or commercial. An accurate forecast of the expenditures allows building owners and project managers to determine the project’s feasibility and allocate resources accordingly.

Several factors affect the construction costs of a commercial building, including the location, design, and building materials. Hence, the most critical variables would be its size and quality. The bigger your project is, the more materials and labor are needed to complete it.

We’ve created a quick guide on how to estimate construction costs for commercial buildings.

The cost of a commercial building project can vary from one location to another. You can expect building in highly developed commercial areas to cost several times higher than other locations. For example, building a project in a metropolis is significantly more expensive than in a suburb.

These areas have dense populations, and therefore, the resources are scarce. It’s the market economy’s way of allocating limited resources to those willing to pay for it. New York and other similar cities are world-renowned business hubs. It’s not just the material you’re paying for. It’s the branding and recognition of having a building in New York that makes it more expensive. 

Let’s dig deeper into the factors that affect the cost.


Building Quality

There are three classifications of building quality: Class A, Class B, and Class C. Your type of walling and roofing, and the infrastructure’s quality are just some of the things considered in determining building quality.

Class A Commercial Buildings (highest quality) are built with top-tier fixtures such as amenities, HVACs, and other technologies. These properties are usually located in cities where land prices are steep. 

They are aesthetically pleasing in both interiors and exterior and require more materials for high walls and ceilings.

Buildings that classify as Class B are of average quality. No higher than four stories tall, these establishments do not have the same level of sophistication in their design and fixtures compared to Class A buildings.

Class C buildings are those located in less expensive areas. Being the cheapest to construct, these structures have the least amount of amenities and fixtures. The finishing quality is far lower than that of Class A and B buildings.


Design and Architecture

Another factor that affects costs would be shape classifications. For example, high-rise buildings cost more than single-story offices. By reducing the floor and outside wall areas, you can lower the construction cost per square meter. 

Complex architectural designs also add to the cost per square foot. This is simply because it will require you more general contractors and materials to complete the project.



Projects built outside business areas are more cost-effective since labor, and other associated costs are cheaper. It can save you anywhere between 2% to 6%. 

On the contrary, those projects built in areas that frequently experience adverse weather conditions can temporarily increase costs by up to 50%. It will be challenging to find skilled workers willing to work under harsh conditions, and those who accept the job would charge a premium in their services. 


Construction Materials

Skyscrapers are generally more expensive to construct due to the amount and quality of materials needed. They’re commonly steel buildings with complex aesthetics, and those don’t come cheap. Aside from the cost of materials, taxes, and shipping charges should also be considered during the estimation.



Permit fees vary depending on location and the type of work to be done on-site.


Mechanical Systems (HVAC)

Mechanical systems such as air conditioning, heating, plumbing, and elevator fixtures are essential for commercial establishments. Getting mechanical and electrical contractors involved early on during the design stage can eliminate errors and maximize efficiency.


Electrical Systems

Regulations suggest that all commercial buildings should meet the requirements of the National Electrical Code (NEC). However, compliance with the NEC would not necessarily lead to energy efficiency. To make your building more energy-efficient, involve an energy design early on the design stage and reduce costs.


Delivery of Materials

Pipes and valves aren’t too pricey in terms of delivery since they fall under off-the-shelf materials. Prefabricated materials, on the other hand, would cost you more. Materials that are bought in bulk, like gravel, also come with higher shipping charges.


How to Estimate Construction Costs

Getting help from a qualified general contractor will provide you with an accurate, detailed estimate to help you secure adequate funding for your project.  

To get a rough idea of how to estimate construction costs for your commercial project, you can do the following:

  • Determine your building quality class
  • Calculate the floor area of the first floor
  • Multiply the floor area by square foot costs estimates 
  • Add the costs of mechanical and electrical fixtures
  • Add the costs for the second and higher floors
  • Add the costs for amenities and facilities you’re planning to add

There are no specific criteria to nail down cost projections. Either way, understanding the variables can help you make accurate estimates and strategic planning to minimize expenses.

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