7 factors that affect the construction cost of a commercial construction project

The cost of construction of a project is the primary concern for most clients. Frequently, they ask about the cost of the project and whether construction work can be executed at a lesser price or not.

This question can be answered by several interlinked factors that control the entire cost of a construction project. They include the priorities of the client, the nature of the project, the designer who develops the building design, the choice of procurement options, prevailing market conditions, legislative constraints, etc.

1. Priorities of the Client

The entire construction work is for the benefit of a client. So, the expectations of the client should be met; otherwise, they will be dissatisfied. Priorities differ among clients; one important factor for a client may be insignificant for another. Priorities are widely classified into quality, cost, and time.

1.1 Quality

Quality is an important consideration and will be remembered long after the cost is forgotten. A project can be completed on time and within a specified budget, but it is considered a disappointment unless it achieves the specified quality criteria. Hence, quality should be the overriding consideration while a building is constructed.

Aspects of quality involve aesthetically pleasing, free from defects on completion, serving the purpose, supported by worthwhile guarantees, satisfactory durability, and customer delight. Some of these aspects are available in the design, but others rely on the contractor's on-site execution.

So, it is important to design and construct a building based on the client's briefing. Nonetheless, over-specified buildings, which involve the use of high-quality materials and craftsmanship, will increase the total cost.

1.2 Cost

Most clients seek a lower price to construct their buildings. This, however, may compromise the quality of the structure. An inadequate budget causes a project to become finance-driven, where cheaper options are preferred over more sustainable alternatives.

Some clients have a fixed budget which enforces contractors to rigorously control costs to ensure the project is delivered within the specified budget. Designing for a limited budget will restrict the introduction of beneficial features, which may result in excessive running and maintenance costs.

A good design does not necessarily need a high budget to execute. The design should provide value for money in terms of total and operational costs. The designer and the client should consider energy and maintenance costs, the appearance of the building, and the effective use of space during the design process.

1.3 Time

Time is the top priority for some clients. For instance, when the staging of a major sporting event is scheduled, a client would to establish a market presence ahead of competitors or benefit from tax incentives. Emergencies like fire, flood, and earthquakes can make time the overriding priority.

Speedy construction leads to the early appointment of contractors and fast-track design approaches where design development and construction operations are parallel. It also requires accelerated working and overtime payment, intense management, and use of subcontractors and suppliers, all of which increase the construction cost.

2. Nature of the Project

The cost of executing a project depends on its characteristics specified by the architect. The design options of buildings are limitless and total costs are difficult to predict. However, the cost can be determined for certain types of buildings, such as schools, with great accuracy.

2.1 Choice of Architect

The choice of architect is the main factor for any project and will reflect the priorities of the client, especially those related to quality and cost. Clients who want to develop high-quality or landmark developments use high-quality design practices. These clients need to pay a premium on prestigious projects because high expectations are commonly linked to high prices.

2.2 Function of the Building

The function of the building will have a major bearing on its costs. For example, the housing cost range differs from apartments and commercial buildings. Similarly, the cost of amenities like sports and theater stadia and conference centers cannot be related to the provision of public infrastructures like schools and hospitals.

3. Cost of Design

The geometry of the building, which involves shape, size, and complexity, greatly impacts the construction costs. For instance, larger buildings with simple, rectangular, regular floor plans and elevations will be less expensive per square meter of floor area than smaller, complex-shaped, curved, or angular buildings.

Simple setting out and buildable solutions generate higher productivity and less waste. On the contrary, complex layouts need a longer time to assemble and may require several trades with greater risks and defects.

Buildings with special features may require expensive materials, resulting in adding extra costs. The attitude toward sustainability and entire life cycle costs will also influence the cost of the project.

4. Nature of the Site

4.1 Location

The location of the project significantly affects its cost. Valuable sites attract high-value developments, and constructing low-value developments on high-value sites is inappropriate.

4.2 Physical Site Conditions

Natural site features, ground obstructions, existing and adjoining buildings, and underground and overground services control how the building is designed and constructed.

Sloped sites require extensive work and naturally endanger the life of workers. Brownfield sites may require demolition, clearance, and remediation costs, making them more expensive to build on than greenfield sites.

4.3 Availability of Services

The design should consider the availability, location, and capacity of existing utilities. Linking the building to these services may be costly if they are inconveniently located or distant from the site.

5. Choice of Procurement Options

Various methods are available for the procurement of projects. The most common procurement methods and their effects on the cost of the project are presented below:

5.1 Traditional Procurement

In traditional procurement, a client appoints consultants to do the design, select a contractor, and supervise the work till the completion of the project.

The traditional procurement route prioritizes quality and effectively produces economic design on most projects.

The main disadvantage of traditional procurement is extended project duration because of the need to complete the design before tendering.

5.2 Design and Build Procurement

In this method, a contractor provides design and construction in one contract. It provides a client with competitively priced projects completed within rapid time frames.

Design and build procurement enables a contractor to overlap design and construction operation. Hence there is little space for errors and modifications.

This method is not appropriate when the client's requirements are poorly defined as the quality of the project can be compromised.

5.3 Management Procurement

In management procurement, a contractor who manages the project works with the design team to offer construction management services.

The management contractor neither carries out design work nor physical construction operations. Subcontractors execute the physical construction.

Management procurement route is related to fast-moving, complex construction projects. These projects tend to be very expensive.

6. Method of Construction

The cost of a project is ultimately specified by how much successful tending contractor charges for executing the construction work. This depends on the price of materials, cost of labor, cost of the plant, competitiveness of subcontractors, and cost of running the individual site. The contractor has to add contingencies cost and profit margin to these costs.

7. Prevailing Market Conditions

The construction process is largely sensitive to changes in the economic outlook and local and national economic activity. Construction activities flourish during economic growth but suffer during economic downturns.

8. Legislative Constraints

The legislation regulates and controls how developments are executed. Rising minimum standards associated with planning, construction, safety, and environmental protection lead to better developments, but it comes with a price.


What factors control the cost of project construction?

1. Priorities of the Client

2. Nature of the Project

3. Choice of Architect

4. Function of the Building

5. Cost of Design

6. Nature of the Site

7. Choice of Procurement Options

8. Method of Construction

9. Prevailing Market Conditions

11. Legislative Constraints

What are the main design factors affecting the construction cost of a project?

1. Plane shape

2. Size of the building

3. Wall-to-floor ratio

4. Degree of circulation space

5. Storey heights

6. Total height of the building

What is procurement in building construction?

Procurement is the process of securing all the goods and services from others that are required to complete a project.

What is traditional procurement