Commercial Construction Costs in 2021

Written by Cathy Kottwitz


July 14, 2021

The cost of materials for commercial construction projects has been changing rapidly in recent months. REjournals recently published an article on the current materials pricing. Pricing and availability issues extend beyond lumber and steel to other products like windows and paint. Unfortunately, these higher prices will likely continue for a while yet. You may be wondering, what does this all mean for commercial real estate locally?

The Direct Impacts

Since supply chain disruptions caused some of the price increase for commercial construction materials, project timelines have also lengthened. For those who want the perfect space for their business, expect projects to take longer as contractors wait for their commercial construction materials and fixtures.

Higher commercial construction material costs have also impacted how we negotiate remodeling allowances in commercial leases. We are seeing less flexibility in rent as the costs for commercial construction materials remains high. This also becomes a factor then as tenants balance wants versus needs for their space.

The combination of higher cost and longer timelines has lead to a preference for existing space over new construction. Where spaces are “close enough” to what the user needs, they are taking spaces as-is and delaying major modifications. Currently, finding spaces within a particular time frame is more important than having it be perfect.

Adapting to Current Costs

As a business owner or investor, the best strategy to cope with higher commercial construction costs depends on your wants and needs. If you have time on your side, you may want to wait a few months to see where things settle. With more time, new opportunities may also become available. However, if you find yourself needing commercial real estate sooner rather than later, be prepared for remodeling to cost more than it would have a few months or a year ago.

At Guiderock Commercial Realty, we also have expertise in negotiation that can help offset some of these end-user costs. Contact us if you would like to talk to an agent to learn more.

Feature Image by D-Vu from Pixabay

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