As a General Contractor specializing in building Bank and Credit Union Branches for 20 years, it is a question we get asked frequently: “We are working on budgets to submit to the Board for approvals on our upcoming construction projects for the year; what should we plug in as a good commercial construction cost per square foot of a typical bank branch?” The answer is always…it depends.
Data mining one can come up with an average commercial construction cost per square foot based on a sufficiently large enough sample of current data. But there are so many potential pitfalls, exponentially made worse the fewer proposed projects an average expectation formula is applied to.
With that in mind, I submit these highly generalized observations of where the current market is trending, but I urge the reader to consider giving more weight to the aggregate cost of branches within the sample ranges.
By that I mean, a branch give or take a few hundred square feet is going to cost about the same to build.
Commercial Construction Cost Per Square Foot
On average, a basic humble design for a bank branch in the size range of roughly 2,000 to 2,500 sq. ft.would be hard to build for less than between $275,000 and $325,000 (excluding architecture, furniture, equipment, signage and no extraordinary site conditions).
With those considerations, you might get away with as little as $110 to $162 per sq. ft. In reality, all the planets need to align just right with your design and unique site conditions to achieve anywhere close to the lower range of $110 per sq. ft. for a modest branch within this size range.
If low budget is the mandate, and you have yet to select a site, go with the higher range formula and add at least 30% for contingencies.
The reason for this strong recommendation is that the fewer the projects, the less opportunity you have for the law of averages to deviate towards the mean expectation. In my opinion, low budget branch design may be penny wise and pound foolish unless you are in a market with little or no competition in the neighborhood.
You may be the better bank or credit union in town, but if you competition a block away with a modern fresh design you may never get a chance to prove it.
Average Costs for Building Sophisticated Branches
More sophisticated designed branches ranging in size from around 3,000 to 4,000 sq. ft. are coming in between $600K and $750K with lower end branches in the ballpark of $500,000. A high end 2,000 to 2,500 sq. ft. branch is going to hover in the $200 to $250 per sq. ft. range and exponentially higher per sq. ft. the smaller space.
For example an elegantly designed 1,500 sq. ft. branch would be hard to build for less than somewhere between $375,000 and $450,000 (roughly $250 to $300 per sq. ft.).
Building a commercial building cost depends on so many different variables. Same design with the same footprint at one location in a new building vs. a 20-year-old building can be the difference of not having to install a new HVAC system, or do major ADA upgrades as just a few examples that can highly impact construction costs.
A major factor impacting higher construction costs are the recently mandated new lighting codes adding $15 to $25 per sq. ft. to electrical costs for a typical branch. The construction labor market in 2016 is tight making it tough to find good qualified labor with commercial construction at a pre-recession pace, so many subcontractors are cherry picking projects to bid due to demand beyond capacity.
Most material costs are rising especially lighting packages which have more than doubled in price over the last two years with new energy codes mandated in California and many other states.
Smoothed average commercial construction cost per square foot are OK to determine where in the ballpark you are likely to land, but in the end, the same branch size, design, and finishes can see an extreme wide swing from one unique site condition to another.
For this reason, we encourage our clients to take us up on our free pre-lease site feasibility and conceptual commercial construction cost per square foot projection service to assist in your pre-lease negotiations and provide qualified budget feasibility unique to a specific site. Armed with qualified knowledge, we often see clients gain leverage on landlord construction allowances or other concessions they otherwise would have lost in a lease deal just from a few of our cursory site observations.