Kirksey Construction Cost Update-2012
Kirksey Architects released its 2012 annual construction cost update on office buildings and parking structures which is an annual poll of leading contractors to update current market conditions. In Houston, several corporate users have initiated or planned new office construction such as Exxon-Mobil’s massive new campus near the Woodlands and Anadarko Petroleum’s expansion of their existing campus in the Woodlands and Phillips 66 in the Energy Corridor. Construction activity is not limited to the corporate users as developers have major office projects either planned or underway in the Woodlands, Galleria, Energy Corridor and Westchase submarkets as Class A inventory tightens in core submarkets and rents push to levels that justify new construction.
Though still in the midst of a depressed building market, we are seeing increased activity In the office building construction. Private construction should improve later in 2012, although the public side may slow. A number of growing companies in the energy sector will be moving forward with building projects in the near future.
In general, construction costs have stabilized at a low point over the past year and have started to move upward. While a few material costs and transportation costs have risen, competition has kept prices near a low point. Depending on the magnitude of the private side building rebound, construction costs should begin to rise more dramatically in the second half of the year. It is still a favorable time to build while interest rates and construction costs are relatively low.
Green building-particularly LEED Certified-is standard for most office buildings. Total costs for LEED Silver certification including hard costs, documentation fees, and commissioning range from 0.5%-2% of construction costs, with higher percentages affecting smaller projects. The current LEED standards favors dense urban locations, resulting in higher costs for suburban buildings seeking LEED Gold or Platinum certification.