Part 1: New construction
As reported over the past two years, construction costs have been escalating. However, in 2009 prices have dropped by 10 to 18%, and are expected to remain at these levels until early 2010. Expect escalation to rise in line with inflation during 2010.
The most significant facts about the market are:
- 2009 has brought one of the worst recessions in U.S. history.
- The government is trying to aid this struggling economy with stimulus money to avoid the markets from falling any further and the new administration has signed a $21.5 Billion stimulus package for research and development in 2009.
- Big public projects are driving the majority of most construction work.
- Oil prices have dropped significantly, down to under $60/barrel, thus transportation costs have dropped, further adding to lower overall costs.
- Construction prices have dropped since the summer of 2008 largely due to firms drastically slashing profit margins to remain competitive in the current market.
- Labor rates have remained flat. Labor unions have renegotiated major project labor agreements in favor of developers and contractors regarding working hours, manpower required for job completion, and so on.
The federal government has proposed a budget of $147 billion for research and development in fiscal year 2009. This is up overall by 2.7% from 2008, though the percentage available for different sectors varied from the previous year. The largest variation was a 61.7% increase for funds allocated for supporting R & D facility operation and equipment totaling $6.5 billion.
Academic sector spending has been associated with capturing monies allocated to new technologies, including research in sustainability for the environment and alternative fuels, along with an increase for stem cell research.
The proposed budget for 2010 fiscal year is $148 billion, which will be a slight increase from 2009. There are other R&D market dynamics contributing to these fluctuations. A number of them are discussed later in the report. But two of the most important market dynamics are the expansion in the number of research clusters and the increased spending on stem cell research.
There has been a dramatic expansion in the number of locations around the country that regard themselves, or intend to be, research hubs and clusters. It’s not just San Francisco, Cambridge, San Diego and Seattle any more. The number now exceeds 40. This adds another element of competitive pressure to a market where key vendors and manufacturers have been consolidating (e.g. lab furniture, sterilizers, glassware washers, DDC building automation systems). The stem cell initiatives in California, New Jersey and other states and now in Congress suggest that significantly more spending will flow into this area. Universities and biotechs will be the first to capitalize on this.
The most influential cost driver in 2009 will be increased competitiveness due to market pressures in local markets. Generally, costs can be expected to drop 10 to 18% on the Coasts, 3% most everywhere else.
 Table 1. Costs have fallen significantly since 2008 due to the economic downturn. |
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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 State 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 2008, are as follows:
- Biomedical. A mix of biology and chemistry functions, typical of university and medical school life sciences facilities. Cost decrease in average facility from 2008 level: 11.5%.
- Animal research. Discovery-phase animal research, procedural spaces, non-GLP systems. Cost decrease from 2008: 11.5%.
- Toxicology. Safety evaluation phase R&D, Phase 1-4 testing, GLP systems. Cost decrease from 2008: 11.8%.
- Chemistry research. Oriented toward organic/synthetic combinatorial, medicinal, and structural chemistry. Cost decrease from 2008: 11.8%.
- Biology research. Full range of basic and developmental biology sciences. Cost decrease from 2008: 11.6%.
- Analytical chemistry. Development-phase quality control, and QC in support of manufacturing. Cost decrease from 2008: 12%.
- Software development. Mix of dry labs with raised floors, and office space. Cost decrease from 2008: 12%.
- Hardware development. Same as software, with some physics and wet labs and some environmental and cleanroom spaces. Cost decrease from 2008: 11.5%.
- 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 decrease from 2008: 11.5%. Class 1,000 spaces may be used for solid dosage form production and other purposes; cost decrease from 2008: 11.7%. Class 100 facilities are suitable for sterile filling and preparations; range: cost decrease from 2008: 18.3%.
- BSL-3 lab spaces. Cost decrease from 2008: 12.7%.
- BSL-4 lab spaces. Cost decrease from 2008: 10.8%.
- Greenhouses. Cost decrease from 2008: 11.6%.
- K-12 biology/chemistry teaching labs; cost decrease from 2008: 11.6%
- Advanced physical science research. Unique, state-of-the-art facilities with apparatus that replicates nature itself. Cost decrease from 2008: 11.6%
- Nanotechnology research. Cost decrease from 2008: 12.1%
.gif?n=3659 "Cost breakdown") 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). |
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To control costs, laboratories were designed to be open and flexible, allowing easy reconfiguration should space needs change.
Understanding the numbers Costs listed in the table 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 (below) 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. 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 Local market conditions are volatile. But the underlying market pressures – decreased prices for commodities, oil, steel and cement due to a decrease in global demand – will result in price reduction and lower labor costs, irrespective of the local markets. Costs have decreased nationally, and are projected to remain steady through the year. See the expanded edition for an index of costs for major international locations and selected domestic markets: www.labdesignnews.com/july2009.
Ted Hammer, FAIA, is managing partner at HLW International LLP, New York, N.Y. (www.hlw.com). Also contributing to this report was HLW Associate Carlie Campesi. Additional information was provided by Iain McWhinney, VP/Bio Pharma, and Oliver Hamm, LEED AP, project manager, both of the consulting firm Faithful+Gould (www.fgould.com).
Cost-forecast methodology
HLW International and Faithful+Gould have collaborated to show the cost trend of the 2009 market. The purpose of this report is to assist those involved in research facility planning, design and construction in benchmarking probable facility construction costs. This document is a benchmarking tool and is not designed to replace a detailed cost estimate prepared during the course of a specific project. It is intended to help set a target and measure progress.
We have employed a multifaceted approach in generating these new forecasts. The methodology for developing the updated costs by facility type includes:
- In-house cost indices for HLW and Faithful+Gould research facility projects.
- Review of nationally published cost data.
- Review and analysis of labor rate and productivity data.
Published in Laboratory Design: Vol. 14, No. 7, July 2009