Building cost models are celebrating their 10th birthday. To mark this happy event, we outlines the factors that will be affecting costs in 2003 for 17 of the most common building types


Fifty-six cost models have now been published in Building over the past 10 years, examining building types or providing detailed coverage of issues such as procurement, prefabrication, value management and the impact of changes to the Building Regulations. Buildings detailed in the series during the past two years have included co-location centres, shopping centres, schools and universities. Although the scope and coverage of the cost model series has expanded considerably over the decade, the objectives remain unchanged. They are:

  • To provide detailed elemental cost information derived from a generic building that can be applied to other projects
  • To publish summary cost information for similar building types
  • To provide a commentary on cost drivers and other design and specification issues
  • To compare suitable procurement routes that secure the client’s objectives

Changes in market conditions

Ten years after the trough of the early 1990s recession, the steady increase in construction prices – as measured by the DL&E tender price index – is showing signs of petering out. Prices are 89% above 1993 levels and levels of activity outside London and the South-east continue to be buoyant – but the commercial market, which has been a driver of the current boom, has slowed considerably. This, however, has not yet fed through to workload.

Although the tender price index has nearly doubled in 10 years, changes in design and specification and in the use of materials and methods of construction have resulted in the overall costs of many building types rising at a slower rate than the index. For this reason, the costs summarised in this update are based on recent projects rather than the adjustment of previously published cost information.

One unavoidable upward cost trend over the past two years has been the impact of legislative and regulatory change. In particular, environmental initiatives have had a direct effect on construction costs:

  • Landfill tax – With active waste now taxed at £13 a tonne, the costs of disposal of demolition materials and builders’ waste have been increasing steadily since the tax was introduced in 1996. The net effect is an overall increase in construction costs of 0.2-0.3%.
  • Climate change levy – Following the introduction of the levy in 2001, gas and electricity prices have risen by 10-15%. Even though energy-intensive industries are eligible for an 80% discount, government statistics show that construction material costs still rose by 0.8-0.9% after its introduction. However, as the climate change levy has been accompanied by a 0.3% reduction in National Insurance, the total increase in construction costs for typical projects has been less than 0.1%.
  • Aggregates tax - Levied at a rate of £1.60 a tonne, aggregates tax has, since its introduction in April 2002, affected the price of fill materials, concrete, precast concrete and road surface materials. The tax is mitigated by a further reduction in National Insurance, and its effect is to increase overall construction costs by approximately 0.8%.
  • Revisions to Part L of the Building Regulations – The revised Part L has introduced requirements for enhanced thermal performance, reduced solar gain and air infiltration, and greater building services efficiency. Proportionately, the costs of compliance are higher on conventional buildings without air conditioning than those with a full building services installation, as the benefits of improved thermal performance on simple buildings do not result in significant compensating M&E savings. Part L was covered in detail in a cost model published on 30 November 2001, but in summary, the costs of conventional heated buildings have risen by 3.5% to 4.5%, whereas those in buildings with air-conditioning have increased by 1.5% to 5%, depending on the design solutions adopted.

Other factors that will drive costs in the foreseeable future include above inflation wage settlements, additional National Insurance costs, rising insurance premiums and, in central London, the congestion charge.

All-in estimating rates

The costs set out in this article are all-in estimating rates. It should be noted that the all-in rates exclude the following items:

  • Demolitions and site preparation
  • Site abnormals
  • Furniture, fittings and equipment (except where specifically noted)
  • External works and external services
  • Contingencies and design reserve
  • Professional fees
  • VAT

The range of costs set out in the tables provides an indication of the levels of expenditure, which reflect normal design and specification criteria rather than an indication of maximum and minimum cost thresholds.
The all-in estimating rates should, except where stated, be applied to the gross internal floor area of a proposed development. Rates are current at first quarter 2003 price levels based, in most instances, on a South-east location. To adjust for other locations, refer to the table of regional variation factors.

Car parks: current cost drivers

  • In city centres, automatic parking systems are being considered on some sites due to space restrictions and security concerns. With costs of £15,000 to £20,000 per space, automatic systems involve significant cost premiums but can result in savings on land and other development costs.
  • Restrictions on total parking provision set out in PPG13 are encouraging the developers of retail schemes to specify wider parking spaces in multistorey car parks, making parking easier and therefore easing congestion and improving the turnover of spaces.
  • PG13-driven parking restrictions on business parks have not resulted in lower levels of car use, and there is intense pressure to maximise the number of potential spaces while sticking to the requirements of the planning guidance.

Industrial buildings: current cost drivers

  • Influences of size, building height and layout, requirements for subdivision and the extent of facilities provided by the landlord. The frame and external walls are the principal cost variables.
  • Tenant requirements for flexibility, which might include raised loading docks or a comprehensive services infrastructure.
  • The adoption of reduced operating cost specifications, affecting walls, roofs, external works and general provisions for damage protection.

Warehouses and distribution centres: current cost drivers

  • Effects of changes to Building Regulations Part L Part L2 and design wind loadings.
  • Requirements for very fast construction programmes driven by the “just-in-time” expectations of logistics companies have reduced project durations for 10,000-20,000 m² schemes, on clear sites, to less than 16 weeks.
  • Extent of client fit-out, including requirements for modifications to the base building.
  • Implications upon the shell design of mechanical handling, chilled storage and associated IT systems.

Business park offices: current cost drivers

  • Sustainability and cost-in-use issues continue to be important for corporate owner-occupiers. Development companies are also developing more active sustainability strategies.
  • Institutional standards and user requirements have become more closely matched now that the BCO specification has been adopted as the industry standard.
  • Future large scale business park developments are likely to be focused on public transport nodes, in response to increased development densities, and further cuts in parking ratios to discourage car usage.

City-centre office buildings: current cost drivers

  • Planning issues. The impact of conservation areas, preserved rights of light, protected views and other consultation issues. The Mayor of London is a statutory consultee on developments of strategic importance in Greater London, which include tall office schemes.
  • Wall to floor ratio and storey height. The ratio and storey height has a direct bearing on principal cost elements, particularly the external walls and structure.
  • Building services installations. Significant savings on development costs are being achieved through the rationalisation of building services design, specification and construction, without affecting the performance of the building.
  • Safety issues. Engineers and developers are still considering the impact of 9/11 on structural performance, means of escape and fire resistance, with additional staircases, on-floor refuges and secure HVAC systems. being some of the enhancements being considered.

Office fit-out: current cost drivers

  • Extent of modifications to the base building to accommodate tenant requirements.
  • Extent of requirement for cellular and specialist spaces.
  • Significant cost reductions on commoditised components including raised floors, suspended ceilings and IT cabling.
  • Increasing quality and simplicity of standard office systems resulting in reduced requirements for bespoke solutions.
  • High levels of contractor competition resulting in fast programmes and low levels of contractors’ preliminaries, overheads and profit.
  • Standard of specification and extent of enhancements including joinery, bespoke furniture, and in services, the extent of redundancy and back-up provided for essential services, or the density of IT points on office floors.

Leisure centres: current cost drivers

  • Client expectations, driven by private sector health and fitness centres are for a wider range of higher quality facilities.
  • Local authorities, supported by lottery funding, are investing in high quality modern buildings to replace existing, outdated municipal stock.
  • Greater consideration is being made of long-life and short-life cycle cost components.

Shopping centres: current cost drivers

  • Development is largely focused on town centre sites with mixed use schemes proposed as a part of broader renewal programmes.
  • Access and parking issues, including planning gain contributions to public transport schemes, and the extra cost of parking provision on restricted sites.
  • Greater levels of customer expectation set by leading edge centres such as Bluewater in Kent, including a more diverse range of amenities and leisure facilities.
  • Larger shop units, particularly for chain and international retailers with “megastore” concepts. Additional requirements for flexibility to accommodate retrofitted mezzanines result in the specification of greater headroom, and stronger structures.
  • Cost implications of mixed use developments, including fire separation, complex circulation routes and transfer structures.

Supermarkets: current cost drivers

  • Supermarket retailing is a mature and highly competitive business sector. The main store chains are continually seeking to reduce costs by increasing the utilisation of sales space and through more efficient distribution.
  • Diversification of the range of stores, including smaller city centre and local outlets to capture new markets.
  • Increasing proportions of fresh and prepared food leading to more extensive refrigeration and other building services installations.
  • Long-term development trends include the use of mezzanine floors to increase floor space in town centre stores, and the continuing development of new store formats, increasingly tailored to local market conditions. Costs of sections 106 and 278 works associated with new store developments.

Stadiums and grandstands: current cost drivers

  • Flexibility in use. In order to maximise use, stands and stadiums are being designed with a wide range of additional facilities. As a result, the gross floor area may increase, relative to seat capacity, to provide internal spaces of sufficient flexibility to accommodate all planned uses.
  • Stadium shape and pitch level. Radial stadiums are attractive, feature an enclosed bowl and have good sightlines, but, compared with a conventional stand arrangement, can involve cost premiums associated with the complexity of the roof and less efficient space planning. The selection of a sunken or ground level pitch will also have significant effects on the costs of structure, groundworks and vertical circulation.
  • Tier arrangements. Second and third tiers are required to maintain reasonable sightlines in large capacity stadiums. Although the building footprint will be reduced, costs per seat will increase because of structure, circulation and fire safety issues.
  • Cost effects of space allowances and seat quality.

Schools and further education colleges: current cost drivers

  • PFI contractors have driven down the costs of schools developments by achieving economies of scale, by rationalisation of design and specification and through the use of robust and economic materials. In some cases this outcome has been at the expense of the design quality associated with one-off school buildings.
  • Requirements to encourage public use of facilities may require enhanced standards of finishes and equipment, together with additional security features.
  • Greater diversity in the curriculum, including more vocational courses and new ways of learning, is requiring the specification of larger “loose-fit” classrooms to accommodate different teaching methods.
  • More investment in circulation and other spaces to enable use for non-classroom based learning activities including group work.
  • Additional costs associated with accommodating Special Educational Needs (SEN) pupils in mainstream schools.

Libraries and learning resource centres: current cost drivers

  • Investment in new buildings to rationalise provision and increase the profile of library services.
  • The variety of spaces required to support a broad range of community uses.
  • Integration with commercial and community uses, including further education and retail, to encourage wider use of the facilities.
  • Provision of space and infrastructure for IT and new media.

Primary healthcare: current cost drivers

  • Amalgamation of a range of primary healthcare services in one building under Primary Health Care Trust reforms
  • Availability of public–private partnership funding to develop larger purpose-built surgeries
  • Provision of treatment rooms for a wider range of medical therapies

Hospitals: current cost drivers

  • Costs are primarily driven by the combination of functional spaces required and their adjacent spaces – determining the layout and special efficiency of the hospital.
  • New methods of treatment, including Diagnostic and Treatment Centres, providing dedicated out-patient surgical services.
  • Greater levels of privacy and comfort for in-patients
  • Speed of change in medical practice and health service organisation, requiring flexible “loose fit” buildings suitable for multiple uses.
  • Consideration of occupation issues, including component lives and operating costs by integrated PFI consortiums.

Social housing: current cost drivers

  • Construction budgets are being limited by forecast restrictions on the growth of rental income driven by government controls on rent levels.
  • An increasing proportion of workload is in renewal and refurbishment work associated with large scale voluntary transfers (LSVTs) of housing from Local Authority management.
  • Impact of Building Regulations Part L1 on costs of insulation and low energy features.
  • Development of higher quality housing for unregulated markets for key workers and for shared ownership.
  • Working with private sector developers as part of a section 106 agreement.

Private housing: current cost drivers

  • Planning regulations requiring the provision of increasing proportions of affordable housing as part of private sector schemes. On larger schemes in London this currently ranges from 35% to 40%, depending on the borough.
  • Maximisation of net-to-gross ratio driven by density of apartments and vertical and horizontal access strategies.
  • Quality of external envelope and wall-to-floor ratio.
  • Requirements for comfort cooling, together with the adoption of wet or all-electric heating systems in apartment developments.
  • Quality of kitchen and bathroom fittings.

Hotels: current cost drivers

  • Consumer demand for larger guestrooms in mid-range hotels, with higher levels of specification, including air conditioning.
  • Widespread adoption of contemporary design in hotels aimed at a younger clientele with significant investment in the theatre of the hotel experience, particularly in bathrooms and in restaurants with open kitchens.
  • Greater variety in room layout, interior design and fittings in guest rooms to appeal to repeat visitors.
  • Continuing demand for IT and communications facilities, now including plasma/flat screen TVs, DVDs, broadband and online billing.
  • Remodelling and rebranding of existing guestrooms to move hotels into different market sectors to increase revenues.
  • Procurement of work in occupied buildings, with issues such as speed of work, phasing, out of hours working and health and safety, all of which can affect overall cost levels.