A sluggish construction market and lower cost increases help stabilize laboratory construction costs over those of 2003.![](/ProductImages/0405/rd45chart2.jpg")
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The economic recovery and a continuing low rate of inflation have contributed to relatively small construction cost increases for new or renovated research laboratories, according to an annual study by HLW International LLP, New York City. This trend, similar to that seen in 2003, leads to a forecast of R&D facility construction costs increasing by about 2% to 4% over the late-2003 levels. While these increases are driven less by demand than by other market forces, pressure by pharmaceutical companies to increase their shrinking drug product pipeline, increased labor costs, and higher insurance premiums were major contributors to the modest increase in overall construction costs.
Other contributing cost increase factors include the lingering after effects of the September 11, 2001 attacks and the war on terrorism, increased pressure applied by the U.S. Food and Drug Administration to resolve QA/QC or production issues, an increasing focus on biodefense, and an emerging technology interest in nanotechnology and nano-biotechnology.
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The "Year 2004 R&D Facility Construction Cost Index" was developed through in-house HLW cost indices combined with cost data for research facility projects from Accu-Cost Construction Consultants Inc., New York. HLW also analyzed other contractor bids, nationally published cost data, labor rate and productivity data, and utilized the experience of other construction managers. The annual report is also supported by data from Gilbane Construction Co., Providence, R.I.; Bovis Lend Lease Inc., New York; Turner Construction Co., New York; Skanska Construction Co., Parsippany, N.J.; and Torcon Inc., Westfield, N.J.
According to the HLW cost index analysts, labor rates and materials costs in 2004 are projected to rise 2% to 4%. Insurance rates are expected to increase 50% to 100%, which would add about 2% to the overall construction costs. The change in the posture of the insurance industry is still being absorbed, say HLW analysts. As construction activity continues its expected slowdown, general contractors and construction managers are expected to maintain their 2004 costs close to the levels seen in late 2003.
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West coast still strongLocal geographic market conditions continue to affect the overall cost indices, following the specific dynamics of supply and demand. The construction market in the tri-state New York metropolitan area, the primary basis for this report, has seen a significant slowdown in activity over the past year or so. The west coast technology centers of San Diego and South San Francisco, however, continue to boast particularly strong construction activities, which are likely to continue to elevate their specific cost indices, compared to the rest of the country.
Costs were also cross-indexed for most major U.S. cities and metropolitan areas, and also by international locations. A continuing point of interest is the unevenness of the 2004 cost increases domesticallymany regional costs are expected to increase, but many other areas will see no increase in costs. This unevenness is consistent with the spotty expectations of regional economic growth.
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Some trends that can be seen in the geographical distribution of costs include:
• Urban areas are more expensive than suburban metropolitan areas,
• The South, Southwest, and Midwest are less costly construction markets than the Northeast, mid-Atlantic, and Pacific coast regions,
• The average baseline cost has risen to just over 90% of the cost of the New York metropolitan area, up from a 2000 level set at 80% of the indexed cost.
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Refurbishing a labSmall-scale focused R&D laboratory refurbishments have become a popular method of implementing lab im-provements and enhancements, responding to the fast-moving changes of the technical marketplace. Limited in both scope and cost, these changes are quickly and easily implemented, and offer lab managers an effective means of achieving im-provements to meet the evolving market demands. These changes also do not vary much geographically, since labor costs are a smaller cost component of most of these items.
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According to a 2003 study on Lab Facilities for
Building Design & Construction and
R&D Magazines , the initial construction cost of an R&D facility is only considered a significant factor by about 3% of R&D lab employees. Adequacy of the lab space size, quality of scientific equipment, and the technical resources to their work were considered the most important factors by the lab employees in the survey. Talking to lab owners or employers, though, the overall evaluations changed. According to employers, cost of lab maintenance and the initial construction cost are the top two factors of importance with regard to their laboratory or research facilities, respectively polling 42% and 37% of the respondents in each category.
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Tim StudtAdditional tables of this year's HLW cost analysis are available in the online version of this article at www.rdmag.com.
HLW International LLP (Stanley Stark, Managing Partner), New York, 212-353-4780,
www.hlw.com. Copies of the full report "Year 2004 R&D Facility Construction Cost Index" can be obtained by contacting HLW.
Accu-Cost Construction Consultants (Edward Mermelstein, Principal), New York, 212-687-2121,
www.accu-cost.com