As of this writing early in June 2007, the overall economy is active, and construction activity is markedly up from this time last year, although the R&D construction marketplace continues to present a mixed picture. As reported over the past two years, construction costs have been escalating, and the forecast is for more of the same through 2007.
Fig. 1. In the typical biochemistry lab building, the cost for architecture is about equal to the cost for HVAC, plumbing, and electrical infrastructure combined. However, in an animal research lab, infrastructure costs outstrip architecture costs by about 10% (data not shown).Click to enlarge.
HLW International LLP, New York, N.Y., and its cost-estimating consultant, Accu-Cost Inc., have been publishing lab construction and renovation cost reports annually since 1994. This article will focus on new construction costs in domestic locations, with part 2 (to be published in August) covering renovation costs and international locations. A new feature of this year’s report is the addition of cost information for K-12 science teaching labs and advanced physical sciences and nanotechnology research labs.
The most significant facts about the current market are:
• Costs continue to escalate in 2007 due to the same combustible mix of forces—rising oil prices, aggressive labor demands, spikes in commodity prices, an active construction market. The rates of increase present a mixed picture. Price increases have abated to ~6% annually throughout the Midwest, Southwest, and South Central states. Generally, the East Coast and West Coast, plus Chicago, are experiencing 8 to 10% cost increases due to the high levels of construction activity in those markets.
• Big public projects, schools, high-rise urban housing, infrastructure projects, and retail-mixed use projects are driving the construction booms in these more active markets. The markets in the major interior regions of the nation were more driven by single-family housing development, which has slowed considerably.
• The market activity influence on research facility construction cost is spotty: hot at the margins, but more moderate at the interior.
• Material and commodity shortages still exist, but they have changed. Steel is less of a problem; availability has increased. Cement and gypsum wallboard are in shorter supply. Oil prices are still high—well over $50/barrel—and geo-political situations are volatile enough that price increases could occur rapidly. Global competitiveness is strong and continues to keep these processes high.
The result of all these forces will be a split market with cost increases ranging from 6 to 10%, largely driven by local market conditions. The rapid 8 to 10% escalation will be concentrated in the major R&D hubs on the East Coast (New York, Boston, Philadelphia, Atlanta, Northern and Central New Jersey), the West Coast (San Francisco, Los Angeles, San Diego, Seattle), and Chicago, which tend to be hot markets.
Everywhere else, meaning the Midwest, the South and Southwest, the West, and the Middle Atlantic states, can expect overall increases
of ~6%.
While capital spending in the pharmaceutical industry has been relatively quiet as Big Pharma continues to try to consolidate existing facilities and fill drug development pipelines, there are signs that corporate capital spending is beginning to increase. Academic capital spending and government investments related to research facilities continue to be active and are growing.
Big Pharma’s focus is optimization. Academic-sector spending has been associated with capturing the high ground in new technologies as well as retaining control of the intellectual property the institutions spawn. Government research spending is focused on biodefense.
There are other R&D market dynamics contributing to these cost increases. Two of the most important are the expansion in the number of research clusters and the increased spending on stem cell research.
2007 new R&D facility construction costs
Building type
2006
$/gsf
2007
$/gsf
Biomedical facility
400-425
430-460
Animal research facility
475-525
525-575
Toxicology facility
450-500
490-550
Chemistry research facility
450-475
490-530
Biology research facility
400-425
425-475
Analytical chemistry facility
335-375
360-410
Software development lab
290-315
325-360
Hardware development lab
350-375
375-425
GMP production facility
Class 10,000
475-550
525-600
Class 1,000
650-750
725-800
Class 100
850-950
925-1,025
BSL-3
425-450
475-500
BSL-4
450-500
500-550
Greenhouse
300-350
325-400
K-12 biology/chemistry teaching lab
n.a.
400-450
Advanced physical science research facility
n.a.
650-750
Nanotechnology research facility
n.a
575-675
Source: HLW International LLP, Accu-Cost
New research facility construction costs for 2007, based on the New York metropolitan/TriState area. Baseline costs can be adjusted to location by applying percentage factors in the chart above
Costs by facility type The table above summarizes average new construction costs for various common lab facility types. Costs in this chart are pegged to the new construction market in the Tri-State New York metropolitan area, within 50 miles of midtown Manhattan but excluding the five boroughs of New York City. (Costs for the outer boroughs of Brooklyn, Queens, Bronx, and Staten Island are slightly less than those for Manhattan, but all are above the Tri-State index point of 100.)
Assumptions for each type of facility, likely ft2 cost ranges, and the forecast average annual percentage increases compared with 2006, are as follows:
• Biomedical. A mix of biology and chemistry functions, typical of university and medical school life sciences facilities. Cost increase in average facility from 2006 level: 8%.
• Chemistry research. Oriented toward organic/synthetic combinatorial, medicinal, and structural chemistry. Cost increase from 2006: 10%.
• Biology research. Full range of basic and developmental biology sciences. Cost increase from 2006: 9%.
• Analytical chemistry. Development-phase quality control, and QC in support of manufacturing. Cost increase from 2006: 8%.
• Software development. Mix of dry labs with raised floors, and office space. Cost increase from 2006: 13%.
• Hardware development. Same as software, with some physics and wet labs and some environmental and cleanroom spaces. Cost increase from 2006: 10%.
• GMP production. Part of a larger building or facility, representing only part of the full building cost. Class 10,000 spaces encompass staging, cleaning, and assembly; cost increase from 2006: 10%. Class 1,000 spaces may be used for solid dosage form production and other purposes; cost increase from 2006: 9%. Class 100 facilities are suitable for sterile filling and preparations; cost increase from 2006: 8%.
• BSL-3 lab spaces. Cost increase from 2006: 11%.
• BSL-4 lab spaces. Cost increase from 2006: 10%.
• Greenhouses. Cost increase from 2006: 12%.
• K-12 biology/chemistry teaching labs. Cost increase from 2006 not applicable, data first provided in 2007 survey.
• Advanced physical science research. Unique, state-of-the-art facilities with apparatus that replicates nature itself. Cost increase from 2006 not applicable, data first provided in 2007 survey.
• Nanotechnology research. Cost increase from 2006 not applicable, data first provided in 2007 survey.
Understanding the numbers Costs listed in the table on page 5 include all hard construction, on a gross ft2 basis, for the total built area. Imagine raising the building and turning it upside down; anything that doesn’t fall out was considered part of the “hard construction” cost. Fig. 1 (page 1) shows a general breakdown of such costs in the typical 100,000- to 200,000-ft2 biochemistry lab building.
For our purposes, the term “hard costs” includes the base building construction, walls, doors, ceilings, mechanical/electrical/plumbing systems, lighting, elevators, and building automation systems. Lab construction hard costs also include lab furniture, fume hoods, biosafety cabinets and laminar flow hoods, major built-in equipment (for instance, sterilizers), walk-in rooms, large glassware or cage/rack washers, built-in cabinetry, sliding walls or partitions used to subdivide large spaces, and food-service equipment. The pathways, conduit, cable trays, and termination panels for IT and telecom systems are included, but the actual cabling, local devices, and computers are not.
We included average landscaping and utilities costs to 5 ft outside the building line. Our numbers also include the general contractor’s overhead and profit (or the construction manager’s fee and general conditions). It is also customary and prudent to include a design contingency fee in the construction cost.
Our numbers do not reflect overall project costs, however, because they omit the following:
• FF&E (furniture, fixtures, and equipment) costs. These include desks, workstations, chairs, conference room furniture, furniture for common/break areas, file cabinets, coat hooks, and so on.
• Movable and benchtop equipment.
• IT, telecom, computer cabling, and phone systems.
• Computers.
• Audiovisual equipment.
• Signage and artwork.
In addition, the survey omits so-called “soft costs,” which predictably include:
• Architect/engineer design service and consultant fees.
• Construction change orders and owner’s contingency.
• Legal fees.
• Permit and filing fees.
• Unpredictable costs (for instance, land costs, financing costs, moving costs, relocation costs associated with renovation). The unpredictable costs could exceed the cost of construction.
For a typical new building, hard costs represent 70 to 80% of overall project costs, excluding land and financing.
Variations within facility type As discussed above, facilities that fall into identical categories may display a fairly broad range of ft2 construction costs. Factors causing these variations include:
• Program space (lab to office ratio; in other words, the ratio of expensive to inexpensive space).
• Floor-to-floor height.
• Use of interstitial mechanical space.
• Exterior wall material and area. (The average building has a floorplate configuration whereby the aggregate exterior wall area is within 50% of the building’s total gross ft2. Anything deviating from the norm will affect the cost/ft2.)
• Perimeter of exterior wall (perimeter to floor-area ratio).
• Efficiency of the floor space.
• Extent of system redundancies.
• Type of casework (fixed or flexible, metal or wood).
• Soil conditions and their effect on foundation design.
• Extraordinary degrees of vibration intolerance.
• Use of sole-source manufacturers.
• Restrictive site conditions.
• Lab finishes (vinyl composite tile and epoxy paint vs. synthetic flooring and high-build epoxy finishes).
• Sustainability features. Increasingly, sustainable design features and practices are infiltrating the research facility design agenda, whether or not the building is being created under the U.S. Green Building Council’s LEED program or the SPiRiT guidelines (the U.S. Army Corps of Engineers’ sustainability program). The total number of examples remains fairly small, and there are a limited number of data points to work with, but this situation will soon change.
Fig. 2. It’s more costly to build in urban centers than in suburban areas, but
geographically remote locales such as Anchorage and Honolulu are also expensive. Click to enlarge.
Based on our experience and analysis, we can report that the steps from a basic, responsible lab building design to the LEED Certified level (a minimum of 26 points on the required LEED criteria) represent a construction cost premium of 10 to 15% above usual predictable costs. Higher levels of certification (Silver, Gold, Platinum), assuming they can be achieved, entail higher cost premiums, though it is probably too soon to predict what such premiums will be. Climate also has a very significant impact on the sustainability equation, so premiums are likely to vary considerably with location.
Location factors Location market conditions vary. They tend to be uneven. But the underlying market pressures—increased prices for commodities, oil, steel, and cement due to global demand—will result in price escalation, higher labor costs, and higher logistical costs, across the board. Costs are rising nationally. All locations are creeping closer to those of the New York Tri-State area.
Fig. 2 (above) shows costs for major U.S. cities and metro areas, indexed using the New York Tri-State metro area as “100.” The basis for the indexed costs includes an analysis of market conditions, a review of project construction costs nationally, and regional labor rate and productivity factors. Most regional variations can be attributed to labor costs and productivity issues.
Major metro centers with a significant industrial or academic R&D base (San Francisco, Los Angeles, Chicago, Boston) have costs close to or equal to those of metro New York. Urban cores are more expensive to build in than suburban metros. Isolated locations like Anchorage and Honolulu are also expensive, mainly due to sourcing issues.
In general, the South, Southwest, and Midwest are less costly than the Northeast, Mid-Atlantic, Pacific Coast, or industrial Midwest and Great Lakes regions. However, there are anomalies. Research Triangle Park, next door to Raleigh, is a significantly more costly construction environment.
Many domestic markets are not expected to experience very significant changes from last year’s ratings (data not shown). Markets predicted to tick upward by ~5% compared with last year (in terms of their comparison with the baseline New York Tri-State index) include Baltimore, Boston, Dallas/Fort Worth, metropolitan Los Angeles, Minneapolis, metro Washington D.C., New York City, Philadelphia, Puerto Rico, Research Triangle Park, Seattle, and St. Louis. Increases of 10% are expected in San Diego, and up to 20% in metro San Francisco.
We don’t expect any of the domestic markets we track to experience a decline in construction costs compared with last year (again, relative to the New York index).
Today’s average baseline cost for all the domestic markets studied is more than 90% of indexed New York costs—up from the 2000 level, when it was only 80% of indexed costs. Twenty-one of the 32 locations are at 95% of the benchmark, or greater; only 10 are at 90% or lower.
Stanley Stark, FAIA, is managing partner at HLW International LLP, New York, N.Y. (www.hlw.com). Also contributing to this report was Ted Hammer, FAIA, managing partner at HLW.
Additional information was provided by Ed Mermelstein, principal, Accu-Cost Construction Consultants (212-687-2121, emermelstein@accucost.com).
Cost-forecast methodology
HLW International and Accu-Cost employ a broad, multifaceted approach in generating forecasts. The methodology for developing updated costs by facility type include:
• In-house cost indices for HLW and Accu-Cost research facility projects.
• Analysis of other contractor bids and the experience of other construction management firms. HLW and Accu-Cost acknowledge the continuing assistance of Gilbane Construction Co., Bovis Lend Lease Inc., Turner Construction Co., Skanska Construction Co., and Torcon Inc. for providing data for this study.
• Review of nationally published cost data.
• Review and analysis of labor rate and productivity data.
This annual cost report is intended to assist people involved in research facility planning, design, and construction in bracketing and benchmarking their probable facility construction costs. It is a benchmarking tool, and is not designed to replace a detailed cost estimate prepared during the course of a project.
HLW and Accu-Cost wish to acknowledge the help offered by Ahmad Soueid, AIA, senior VP at HDR Architects Inc., in providing cost guidance related to advanced physical sciences labs and nanotechnology research facilities.
