Hotel, Motel and Apartment Building Construction Costs

According to the accompanying table and charts, a “typical” fast food restaurant and a one-story office building had the largest year-over-year increases in construction costs in July 2008 (both +2.8% on average for 25 major centers) among four types of low-rise building structures monitored by RSMeans. Following closely behind was a day care center (+2.7% on average). A convenience store (+1.2%) exhibited only a modest increase in cost.

As for the actual dollar-per-square-foot cost of construction, a fast food restaurant is the most expensive to build. A single-story office building comes next, then a day care center. A convenience store is the cheapest to build. The range between the lowest and highest cost structures is quite wide − a markup of more than two-thirds (+72%).

New York Leads in Year-over-year Cost Increases

Among the 25 cities shown, New York was the leader for greatest year-over-year percentage increase in construction costs, ranging from +4.7% for both a fast food restaurant and a single-story office building to +3.0% for a convenience store. San Francisco, Chicago, Washington and Kansas City formed the next tier of largest percentage gains. Rounding out the Top 10 were Philadelphia, Los Angeles, Boston, Atlanta and Dallas.

Large cities in the middle of the pack for percentage cost increases were Pittsburgh, San Diego, Denver, St. Louis and Miami. Major cities with the lowest year-over-year construction cost rises were Houston, Detroit, Portland, Phoenix and Minneapolis.

City Rankings Based on Level of Construction Costs

A ranking of cities based on the dollar-per-square-foot level of construction costs may be quite different than one based on year-over-year percentage change. Therefore, it is well to consider which cities are the most expensive in which to build and which are relatively cheaper.

New York is the costliest city in which to build in the United States, with San Francisco in second place. Boston, Philadelphia and Chicago form the next tier. Minneapolis, Los Angeles and San Diego are also relatively expensive.

Kansas City, Seattle, St. Louis and Detroit are in the mid-range for dollar-per-square-foot construction costs. The nation’s capital, Washington, lies just slightly below the middle of the pack. Major cities that are relatively low cost are Atlanta, Miami, Phoenix, Houston and Dallas.

It is also informative to provide some regional construction cost comparisons. For example, it costs 27% more to build in Chicago than in Atlanta and there is a similar spread between high-cost Philadelphia and low-cost Miami. Finally, the premium between the highest-cost city, New York, and the lowest-cost city in the table, Winston Salem, is +69%.

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