Part 1: New construction
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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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As reported in July 2009, construction costs have dropped from years previous. As of the writing of this report in June 2010, and despite the fact that the market has shown early signs of recovery, costs have fallen about 5% overall from 2009, and construction costs in the R&D sector have fallen ~8% since January of 2010. Although some leveling off is expected, construction costs may actually decrease 10% before costs begin increasing as the market stabilizes and begins to recover over the next year.
The most significant facts about the market are:
- 2009 brought one of the worst recessions in U.S. history, with slow recovery in 2010.
- Overall market prices have dropped about 5% since 2009; lab costs have also decreased. Though generally in keeping with the downward market trend, they have dropped about 8% since the start of 2010 and may fall 10% before the market stabilizes and recovery begins.
- Bids still attract numerous responses, which continues to pressure contractor pricing to remain competitive in the current market.
- Labor rates have remained relatively stable from last year, particularly with the unions.
- Material production slowed in 2009, due to lack of demand. Prices have now stabilized. Demand is increasing; therefore, there are some small increases in cost, notably in steel production, are occurring.
- There are signs of recovery. with clients looking at design options and ways to better utilize existing spaces with minor construction.
- The broader market is showing good signs of improvement with the recent round of quarterly earnings by publicly listed companies consistently showing profits.
- A cause for concern, as recovery is taking place across a global marketplace, are the European debt problems specifically related to Greece, Portugal and Spain. While these countries make small contributions to global GDP, their troubles may affect confidence and growth in the euro-zone as a whole, and possibly lead to a “double-dip” recession.
- More concern is developing regarding the state of public finance--both at a federal and state level. New York and California in particular are on extremely tight budgets. A little more than a third of the federal construction stimulus money has been spent, with a large number of major stimulus contracts now awarded. Currently public finance remains extremely tight.
- Oil prices have started increasing from last year, up to about $74/barrel, keeping in line with the general U.S. recovery.
- Barring any further economic problems, prices should continue to level off in 2010. As the market continues to stabilize, and if project work starts picking up, prices are expected to start increasing. Now is an excellent time for clients to be bidding a construction project.
The federal government has proposed a budget of $147.5 billion for research and development in fiscal year 2010. This is up very slightly from 2009’s revised $147.4 billion R&D budget, and the percentages available for different sectors remain in line from the previous year.
The latter part of 2010 will reflect the beginning of recovery. While prices are continuing to level out, movement has commenced on the client end. There has been a growth in research partnerships between corporations and universities in order to maximize resources and funding. Clients are eager to become more efficient and capitalize on the stabilized labor and materials costs and negotiate real-estate options with new projects. They are more cautious and conservative with their program needs and budgets, and expect very competitive prices for architectural services and construction.
The majority of cost reduction is attributed to the reduction in overhead and lack of profits being taken by those involved in construction projects. Significant cuts have been made by both contractors and design firms, with staff doubling up their workloads.
Layoffs have been common, salaries reduced, and companies accepted little or no profit for new work. It has become a very competitive market for winning new work, with much upfront design and budget pricing required before a project will even be awarded to a team. This situation is beginning to stabilize, and layoffs are significantly diminishing in 2010.
The bottomline conclusion: The most influential cost driver in 2010 will be increased competitiveness due to market pressures in local markets. Prices are expected to remain flat through the duration of 2010. Although there are positive signs of companies beginning to plan for the future, market uncertainty still exists, along with an abundance of real estate in the market.
Costs by facility type
The table 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 to 75 miles of midtown Manhattan. This analysis includes parts of New York, New Jersey and Connecticut, but excludes 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 2009, 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 2009 level: 3.4%.
- Animal research. Discovery-phase animal research, procedural spaces, non-GLP systems. Cost decrease from 2009 4.5%.
- Toxicology. Safety evaluation phase R&D, Phase 1-4 testing, GLP systems. Cost decrease from 2009: 5%.
- Chemistry research. Oriented toward organic/synthetic combinatorial, medicinal, and structural chemistry. Cost decrease from 2009: 5%.
- Biology research. Full range of basic and developmental biology sciences. Cost decrease from 2009: 4.5%.
- Analytical chemistry. Development-phase quality control, and QC in support of manufacturing. Cost decrease from 2009: 4.5%.
- Software development. Mix of dry labs with raised floors, and office space. Cost decrease from 2009: 5.4%.
- Hardware development. Same as software, with some physics and wet labs and some environmental and cleanroom spaces. Cost decrease from 2009: 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: 4.7%. Class 1,000 spaces may be used for solid dosage form production and other purposes; cost decrease from 2009: 4.9%. Class 100 facilities are suitable for sterile filling and preparations; range: cost decrease from 2009: 6.1%.
- BSL-3 lab spaces. Cost decrease from 2009: 5.2%.
- BSL-4 lab spaces. Cost decrease from 2009: 4.8%.
- Greenhouses. Cost decrease from 2009: 4.7%.
- K-12 biology/chemistry teaching labs; cost decrease from 2009: 4.8%.
- Advanced physical science research. Unique, state-of-the-art facilities with apparatus that replicates nature itself. Cost decrease from 2009: 4.7%.
- Nanotechnology research. Cost decrease from 2009: 5.2%.
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New research facility construction costs for 2010, based on the New York Metropolitan/TriState area (excluding New York City). Baseline costs can be adjusted to location by applying percentage factors in the charts in this month’s expanded digital edition at http://www.rdmag.com/General/Laboratory-Design-News-Archive/
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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 (location) 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. For a renovation, hard costs tend to fall into the 50 to 65% range; with such projects, the likelihood of unforeseen existing conditions and probable need for relocations must be considered.
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, as discussed below.
Sustainable design
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 other green guidelines. An increasing number of examples provides new data points that can be used to develop metrics and base trends.
Clients typically ask about cost premiums for sustainable design/construction. This may vary significantly from project to project. The answer hinges on the following questions:
- What are we comparing “green” to? Depending on individual client standards, project location and customary building techniques, the project that is being used as the basis of comparison might already be well on its way to a LEED certificatioin status. In certain jurisdictions, compliance with enhanced building codes has already raised the bar on many projects.
- What costs are included? Capital costs are classified into direct, indirect and soft costs. There are direct costs related to the LEED registration and certification process. Prerequisites include fundamental commissioning, which may entail as much as a 1% project cost increase. However, commissioning for a research facility is not only good practice but common practice.
- When is sustainable design considered? Good design should incorporate sustainable principles. This works best if begun at the very early stages. Issues such as building orientation and massing do not typically cost any additional money to analyze properly in the design stage but can be costly if considered later. When initiatives overlap, synergies occur, enhancing their impact.
Based on selected analysis, the step from basic responsible lab building design to a LEED v. 3.0 Certified level (minimum of 40 to 49 points) may represent a construction cost premium ranging between 3 and 5% above usual predictable costs. As we reach for higher levels of certification, assuming these can be achieved, the premiums grow. However, the beneficial impacts on life-cycle costs (total cost of ownership) should be recognized as a valuable initial capital investment. These initial costs represent only a fraction of the total life-cycle costs for ownership.
Research facilities consume extreme quantities of energy (i.e. water and power). Therefore more efficient design and equipment, though perhaps more costly initially, quickly become cost benefits.
Location factors
As always, our report includes data on national, regional and international costs. Local market conditions are stabilizing, but still hurting from 2009. Costs have continued to go down nationally, but are projected to remain steady with an expected rise through next year. The basis for the indexed regional and international costs include: analysis of market conditions, review of project construction costs nationally, regional labor rate and productivity factors. The regional variations are largely attributable to labor cost and productivity issues.
See the July 2010 expanded edition for an index of costs for major international locations and selected domestic markets: www.rdmag.com/General/Laboratory-Design-News-Archive/
The August 2010 issue will present data for lab renovation costs, including major renovations as well as small-scale refurbishments.
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).
