In its second cost model update, Davis Langdon & Everest examines how the prices of four key building types – business parks, hotels, offices and supermarkets – have been affected by change

<B>Cost model update </B>
Since 1993, thirty-two Cost models have been compiled by cost consultant Davis Langdon & Everest and published in Building.
In its second cost model update, DL&E examines current costs for the building types previously featured in the series.
This update starts with a detailed review of four building types that have seen particular change over the past two to three years – business parks, hotels, offices and supermarkets. Then costs of other building types, such as leisure centres and student residences, are summarised.
All-in estimating rates are provided for each building type featured. The detailed review also includes indicative all-in cost-planning rates of key building elements in each of the four types.
<B>All-in estimating rates </B>
The all-in estimating rates are inclusive of all construction costs, but they exclude demolitions, site abnormals, furniture, fittings and equipment, external works, professional fees and VAT. Allowances for contingencies and design reserve are also excluded. The range of costs, taken from recent projects, does not indicate minimum and maximum thresholds, but provides a price range that reflects usual design and specification criteria.
The all-in estimating rates, current at first quarter 1999 price levels, should be applied to the gross internal floor area of a development.
Building element all-in cost planning rates are examples of the most cost-significant building components related to the specific building type. The lists are not comprehensive. The cost planning rates, current at first quarter 1999 price levels, should be applied on the basis of the elemental unit stated in the tables. Rates are exclusive of preliminaries, contingencies and design reserve, professional fees and VAT.
Except where stated otherwise, rates are at South-east prices.
<B>Business parks
Development changes


  • Reduced speculative development</B> Developers are aiming to pre-let schemes, so specification levels are being driven up in negotiation by specific tenant requirements.
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  • Serviced office sector</B> The requirements of serviced office providers typically include a 15 m wide floorplate and additional lifts, vertical circulation and riser provision for a high degree of subdivision and cellularisation. Where necessary, the wall-to-wall dimensions from 15 to 18 m will add £95-110/m² gifa to project cost as a result of a less efficient floorplate. Provision for additional vertical circulation and risers adds a further £55-65/m² gifa.
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  • Diverse building types</B> Starter units and multiple-use "flex" buildings aimed at small-space users are proving successful.
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  • Air-conditioning</B> Business-park buildings, particularly those with deep (18 m) floorplates in prestigious locations, continue to be specified with air-conditioning, usually provided by a fan-coil-based system. Mixed-mode buildings, providing a combination of natural and mechanical air treatment, are also increasingly common, although where they have been developed for the speculative market, many have been retro-fitted with full air-conditioning to suit occupier requirements.
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  • Specification levels</B> The second edition of the British Council for Offices specification, published in May 1997, recommends reductions in primary power allowances for lighting. It also recommends a reduction in office-area lighting to 350-400 lux. A revised BREEAM assessment for offices was published in 1998. This included additional sections dealing with management issues, health and safety, energy, transport, water, materials, land-use, site ecology and pollution.
  • <B>Current cost drivers
  • Achievable rent levels</B> These set tight constraints on construction budgets
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  • Cost and timing of infrastructure investment</B> Both these issues often relate to planning gain agreements
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  • On-site provision of facilities buildings</B> Restaurants, shops, bank outlets and so on are best integrated into the business-park masterplan, rather than added as an afterthought
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  • Maximisation of developed floor area</B> This should be allowed for in planning consent, through an appropriate mix of building configurations in the masterplan
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  • Optimisation of structural grids</B> 7.5 × 7.5 m for concrete, 9 × 9 m for steel
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  • Limitations on finished floor height</B> The second floor of a three-storey building should be less than 7.5 m high to avoid the mandatory inclusion of fire-fighting staircases
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  • Design quality</B> Design quality includes the specification of elevations and, at the top end of the market, the incorporation of atria
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  • Choice of materials</B> Materials used on elevations has, on some projects, been determined by tenant preferences.
  • <B>Procurement
  • Design and build</B> This is a common procurement route adopted for many business-park schemes. Construction management is also widely used on high-profile business parks, such as those located in the M4 corridor.
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  • Business parks</B> These can be developed at competitive prices in locations where there is strong competition between regional contractors. Team continuity and downward pressure on construction costs can be maintained through a rolling programme of development.
  • <B>Future trends
  • Mixed-use developments</B> Business parks will increasingly include housing and community facilities, potentially enabling people to live and work on the same site
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  • Call centres and serviced offices</B> Both these markets are likely to grow
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  • Pre-lets</B> An increase in pre-lets will drive developers to provide bespoke products to suit occupier requirements
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  • Out-of-town development</B> Such development is likely to be constrained by transport and planning policies.
  • <B>Hotels
  • Development changes
  • City-centre development</B> The conversion of office buildings to hotels has been stimulated by falling values in the secondary office market and a relaxation in planning restrictions affecting change in use.
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  • Budget hotel sector</B> The budget sector continues to expand. Deloitte and Touche is forecasting a compound annual growth rate of nearly 20% in room capacity for the period 1997-2002. The aparthotel sector, providing self-catering apartments, will also continue to expand.
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  • Restaurant/leisure facilities</B> Non-residential facilities in town-centre hotels are being expanded, increasing non-bedroom income of many hotels. This can improve the viability of marginal hotel proposals.
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  • IT/AV installation</B> Information technology/audio-visual installations to conference facilities of mid-range, business and luxury hotel developments are being enhanced to provide a totally flexible IT infrastructure to suit any configuration of system used by the client. IT installations in bedrooms have been scaled down to the provision of points only.
  • <B>Current cost drivers
  • Massing</B> Construction of blocks above five storeys requires the use of a structural frame or concrete cross wall solution and is commonly associated with the use of cladding materials of a higher quality than the brick facings usually specified for two- to three-storey developments. Sprinkler installations and other safety systems may also be required. Where guestroom blocks are set above communal spaces, a transfer structure will also be necessary. Together, these factors typically add £70-100/m² gifa to the overall construction costs of a mid-range hotel.
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  • Costs of works associated with guestrooms</B> A high proportion of the value of work of hotel projects is directly related to the number of guestrooms rather than the floor area of a bedroom block. The scope of work directly related to guestrooms, which includes windows and doors, furniture, fittings and equipment, mechanical electrical installations and so on, typically totals 35-40% of the cost of a mid-range bedroom block.
  • <B>Procurement
  • Design and build</B> This continues to be widely used throughout the hotel sector
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  • Budget lodge/hotel developments</B> These use a high degree of standardisation and prefabrication, and are increasingly procured through partnering/framework agreements
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  • New-build, mid-range hotels</B> These are also suitable for design and build, as a result of an increasingly high degree of product standardisation related to brand image and service levels. Design teams are commonly novated to the contractor
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  • Luxury hotels</B> Design and build has also been adopted on luxury hotel projects, where the sole responsibility for cost, time and quality required by the client can be provided by an integrated, contractor-led project team.
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  • Construction management and other management routes are widely used for projects at the top end of the market</B> Management routes are particularly suitable for conversion projects, where programme constraints, and the need for design and contractor flexibility in response to the condition of an existing building, place a premium on the project team's ability to manage the construction process and maintain build quality.
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  • Furniture, fittings and equipment</B> High levels of FF&E expenditure need to be controlled by a dedicated team. There are no standard procedures for the procurement of FF&E, and responsibilities can be split, resulting in loss of control. Clear definition of the scope and responsibility for design, budgets and procurement is therefore essential.
  • <B>Future trends
  • "Hard budget" sector</B> The development of basic, unstaffed lodges in the UK will be influenced by European operators
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  • Lodge/budget sector</B> The growth of this sector will be increasing focused on town centres
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  • Flexible space in city-centre hotels</B> An increase in space that can be used for conferences, functions and meetings
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  • "Luxury lodges" in city centres</B> Expansion of this sector will provide high-quality accommodation with minimal front-of-house facilities.
  • <B>City, West End and regional offices
  • Development changes
  • Consolidation</B> In London's financial, legal and accountancy sectors, consolidation has pushed up demand for office buildings of more than 25 000 m² gifa with floor plates of 2000-3000 m².
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  • Low levels of speculative development</B> As most developments do not start on site without a pre-let, projects are becoming more bespoke.
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  • Targeted development</B> Developers are aiming projects at specific sectors in order to secure pre-lets. They are providing buildings to suit the occupier, such as clear-span offices for financial services.
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  • Shell-and-core development</B> Pre-let developments are being handed to the tenant at shell-and-core stage. The developer contributes to the tenant's fit-out costs. Shell-and-core and fit-out works are sometimes carried out in parallel to reduce the overall programme.
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  • Mechanical services</B> Installations, specified for urban offices, are increasingly diverse, particularly for owner-occupied developments. Low-energy displacement systems are most common outside London but have been specified in some central London offices.
  • <B>Current cost drivers
  • Planning issues</B> These include the impact of conservation areas, preserved rights of light and background consultation.
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  • Overall building height</B> Constraints on building height related to strategic views and requirements for column-free space place a premium on minimising the depth of upper-floor structures.
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  • Building out of existing basements</B> Where sites with existing basements are redeveloped, basements costs will be £150-200/m² cheaper than projects where full basement excavation is necessary.
  • <B>Procurement
  • Guaranteed maximum price</B> Developers are seeking GMP contracts in order to transfer time and cost risks to contractors. There is no common procurement or contractual framework for establishing a GMP. Bespoke, modified lump-sum and design-and-build contracts are all used. In some cases, the design team is novated t, shell and fit-out works are often undertaken as separate contracts. Subcontract packages are commonly negotiated and partnering-based approaches are common. Emphasis on pre-construction planning has halved construction programmes, to 46-50 weeks. Fit-out programmes are typically 20-26 weeks for a 4000 m2 store.
  • <B>Future trends
  • Smaller neighbourhood stores
  • More space provision for concession units
  • Home shopping via the Internet.ressure to build tall buildings in the City
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  • Slowdown in development</B> This is likely to occur from 1999-2001, with development resuming thereafter
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  • Long-term demand</B> Reorganisations will impact demand for office space
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  • Reduced space requirements</B> IT innovations such as flat-screen monitors will mean less space is needed.
  • <B>Supermarkets
  • Development changes
  • Retail formats</B> Smaller stores are being developed in city centres and smaller towns. Concession space for high-street services such as dry cleaners is an important profit centre. Extensions are required for sales-floor area and to provide space for coffee shops and so on.
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  • Location</B> In response to government planning guidance, some stores are being developed on high-street or edge-of-town locations. Some developments are mixed-use, with combinations of other retail units or, in some cases, housing.
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  • Design</B> Store design has moved away from the 1980s "brick box", with widespread use of cladding and glass. On the other hand, blank side elevations are needed to maximise shelving and space utilisation.
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  • Floor planning</B> Smaller units have a lower proportion of back-of-house and storage space. High-street locations often require two customer entrances to serve the high street and car park. A coffee shop by the main entrance is a strong influence on the planning and design of the front elevation.
  • <B>Current cost drivers
  • Refrigeration</B> Central plant and cabinets account for 20-25% of the cost of the retail fit-out, ranging from £150- 230/m² gifa for stores with a sales area of 1850-2350 m². Costs of refrigeration have not risen significantly as a result of specification changes related to the elimination of CFCs.
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  • Floor finishes</B> Terrazzo remains popular, but difficulties with procurement have resulted in other options being examined, such as marble conglomerate, at a potential extra over cost of £40-45/m² (£20-25/m² gifa).
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  • Ceiling finishes</B> Metal pan tiles are widely specified, although some stores are omitting suspended ceilings altogether. However, savings are typically no more than £5/m² gifa.
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  • Hygiene requirements</B> Glazed tiling to preparation and catering areas has been replaced by compressed PVC sheet in response to UK and European Union hygiene regulations. The extra cost, £30/m² of treated wall area, typically adds up to 3000 a store.
  • <B>Procurement
  • Lump-sum contracts and construction management</B>
  • These are widely used. Where the shell is leased by the supermarket, shell and fit-out works are often undertaken as separate contracts. Subcontract packages are commonly negotiated and partnering-based approaches are common. Emphasis on pre-construction planning has halved construction programmes, to 46-50 weeks. Fit-out programmes are typically 20-26 weeks for a 4000 m2 store.
  • <B>Future trends
  • Smaller neighbourhood stores
  • More space provision for concession units
  • Home shopping via the Internet.
  • Indicative cost tables – other building types </B>
  • The tables set out indicative costs for a range of building types.
  • Unless stated, all costs are at February 1999 price levels, based on a South-east location and include allowances for preliminaries. Site abnormals, external works and drainage, contingencies, professional fees and VAT are excluded.