estimating construction costs
December 7, 2022
By Julian Woods
As a practice we always try to advise clients on costs, and treat your money as if it were our own. In our Stage 1 feasibility reports we give our clients outline cost estimates based on cost per m2. This is a highly important part of our feasibility studies; we want to see your ambitions made real and get your project built and the best way of doing this is to be upfront about costs so we can design within the budget and ensure the project doesn't stall later down the line.
We generally like a 2-stage tender for our domestic clients (see previous blog piece) which allows us to get a contractor on board early in the process, mitigating long lead-in times and allowing input from the builder during the technical design stage. It also takes out some risk for the client by getting a figure, if a provisional one, before doing a large section of work which could be abortive if the tenders come back over budget.
Our estimates aren't guaranteed, they are simply a professional opinion on the probable cost of the build. Defining this estimate is an ongoing process - as material costs and availability are linked to political events there is a high level of uncertainty on building costs. Keeping a database of tender returns is one way that we keep our cost estimates up to date.
There are also published cost indices and guides we can use, but analysing our tender returns corroborates these with real world data that specifically applies to our designs.
For a new build house we would generally give an estimate of £2,500 - £3,000/m2, let’s have a look how that compares to some of our recent tender returns.
An average of our recent first stage tender returns for new build houses is £3,397/m2, however the average first stage tender from contractors who were then appointed is £2,970/m2.
The next question from this is ‘where might you be able to make savings?’. We always issue a schedule of works when going out to tender - this identifies different work sections so that contractors can provide costs against each, which enables comparative tenders in an 'apples with apples' manner. Average values for these are given in the following chart.*
*(note that the percentages do not add up to 100% as it’s an average value, and not all projects contain every section)
This gives us a good idea of how much you might be able to save in each area – for example decoration comes in at 2.5%. If you were to decorate the house yourself, assuming a 50-50 split between labour and materials, you might save 1.25% of the overall project cost.
Knowing the initial breakdown of costs at the start of our technical design stage allows much more effective management of your budget and project plan. There is typically an uplift on cost at second stage tender of around 10-20% as the project is specified in more detail.
Extensions are more difficult to analyse, as there is usually an element of retrofitting and refurbishing the existing house which is interlinked with the extension works – such as structural work to open up existing walls, as well as layout changes adapting to the new floor plan.
An average of all first stage tender returns for extensions across the floor area of both the extension and any works to the existing house is £2,799/m2, and the average first stage tender from contractors who were then appointed is £2,614/m2.
We continue to keep a close eye on tender returns we receive from contractors for our projects, and will be adding to our database so that the advice we can give is as up to date as possible. Despite the current economic uncertainty we remain committed to giving our clients appropriate cost advice at each stage, helping to manage risks, take informed decisions, and proceed with confidence to undertake projects that can transform the way they live with vision and values.