Commercial Real Estate Investing

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Jay Real
  • Germantown, MD
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New Shopping complex construction costs

Jay Real
  • Germantown, MD
Posted Sep 15 2021, 14:32

I am *Thinking* of venturing into commercial real estate via a small shopping complex project, around 10Ksqft. Since i am new to commercial real estate investment i need some help in estimating the ballpark cost per sqft number for construction, apart from land/permits. Just the construction part. 

For new complex do i need to provide only shell to the tenants and tenants finishes it? if so will tenant demand a credit for doing the interior.

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Wes Johnson
  • Real Estate Agent
  • Dallas, TX
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Wes Johnson
  • Real Estate Agent
  • Dallas, TX
Replied Sep 18 2021, 04:28

@Jay Real

do you already have a site and land picked out?

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Joel Owens
  • Real Estate Broker
  • Canton, GA
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Joel Owens
  • Real Estate Broker
  • Canton, GA
ModeratorReplied Sep 18 2021, 11:32

If you have no track record of construction for retail centers plan on banks requiring pre-lease of around 50% of building before funding anything.

As to cost per foot impossible to answer. The shape of the piece of land can dictate building design and can make much more expensive. Also the county or city might require ( high style ) architectural features for build quality that run up standard cost per foot substantially. Right now parts and materials with labor shortage so costs are more expensive than usual. I am buying vacant buildings at less per foot than can build for and repositioning them with a new tenant in place for equity upside.

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Scott Mac#1 Rehabbing & House Flipping Contributor
  • Austin, TX
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Scott Mac#1 Rehabbing & House Flipping Contributor
  • Austin, TX
Replied Sep 18 2021, 12:05
Originally posted by @Jay Real:

I am *Thinking* of venturing into commercial real estate via a small shopping complex project, around 10Ksqft. Since i am new to commercial real estate investment i need some help in estimating the ballpark cost per sqft number for construction, apart from land/permits. Just the construction part. 

For new complex do i need to provide only shell to the tenants and tenants finishes it? if so will tenant demand a credit for doing the interior.

 Hi Jay,

Having to ask this online, says to me--you might be undertaking a LOT of financial risk in this project.

That is because there may be other things you don't know, and won't know, until they rise up and bite your wallet.

So it might be smart to factor in [1] Time over runs, and [2] Cost over runs (in your probability/worst case scenario budget--if you do one of those)

Getting with an experienced General Contractor (very early on) who has successfully been on time and on budget for recent similar jobs (size and dollars) in the local area might be a good move--and a good source of LOCAL numbers.

 Good Luck!

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Replied Jan 22 2022, 08:31

I’m new just like you and similar objective - to build a 10-20K sqft office building. This is what I have gathered so far in my research. Construction cost vary widely cause it is heavily depends on labor which is about 70-80% of the cost. So depends on your market, rural/south below average. Metro areas high.