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The Unexpected Costs of Build to Suit Construction

They (whoever “they” are) always say to expect the unexpected. And good planning means just that.

When it comes to commercial development there are undoubtedly going to be unexpected costs.

Broad factors like location, size, type of building, and the market will typically play the biggest role in determining the costs of a build to suit project. But when you dive deeper, there are a number of elements that could surprise you, if you’re not prepared.

Let’s take a closer look at some of those unexpected factors that can play a big role in your project’s overall costs.


blueprints-894779_1920Constructions Drawings/Plans

Given that the design specifications and parameters of a build to suit are of critical importance in establishing the cost of the project, the rent, and the timing for completion, it’s important to provide as much detail as possible in build to suit agreements.

Plans that may not fully meet all criteria can come back to bite you. And unfortunately, it can be difficult to anticipate the unknown requirements from municipalities. They can add cost and time to your project due to revisions, additional permit applications, fees, etc.

Additionally, elements like value engineering, which are meant to decrease costs, can sometimes involve redesigns, which come at a cost, and in the end may be more expensive than the projected savings.


Codes & Permits

There is typically a laundry list of codes that new commercial developments must meet. They may vary from city to city and state to state. And along with meeting those codes comes permits approving your project, especially if your build to suit has highly specialized elements.

Determining what fees are applicable and how much those fees cost can be a crucial step in the commercial development process. Fees can sometimes be unpredictable and difficult to budget for. They can also be quite costly - to the extent that they stifle projects.


Additional Municipal/Utility Requirements

On top of building to code and obtaining government permits, additional municipal and utility requirements can add significant costs to a commercial development project.

For example, design requirements and the design review process can sometimes be unexpectedly lengthy due to denials or unanticipated requirements from design review boards. Adding architectural detail to buildings or slight shifts to the overall layout ultimately leads to longer project timeframes and added costs.

As for public utilities such as electric power, natural gas, fiber optics, water, and sewer services, those can all end up being major components in meeting development requirements.

Utility design, implementation, and expansion to infrastructure/off-site improvements can sometimes be outside the scope of your original work adding time and significant cost.


labor-shortage-and-development-costsSite Issues

While a site investigation is meant to uncover underlying issues with a potential development site, from time to time you’ll encounter site issues during the construction phase.

From structural issues like unsuitable soil to hazardous conditions or other issues discovered along the way, unwelcome surprises during the construction process can increase your expenses and threaten your completion date.


Change Orders

While build to suit projects are designed and built to meet the specific needs of a client, that doesn’t mean each project is free from any potential changes. A host of varying factors from site to site can lead to project change orders after construction has commenced.

Since change orders are directives for work outside the original scope, there can be wide-ranging issues that result from the additional work. The most obvious is the impact on the project budget and timeline. New permits may be required for the changes, adding additional costs as well.


It’s important to remember that in construction and development there will always be surprises. But through thorough planning, budgeting, and the right partnerships for your commercial development project you can navigate those unexpected costs and find success.

Tags: Build to Suit

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