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Cost per Square Foot: What’s a Good Number?

Let’s start with a quiz. What’s the construction cost per square foot for a new laundry?

A. $65
B. $85
C. $125
D. $170
E. $200
F. All of the above

The correct answer is “F. All of the above”. I know what you’re thinking. That can’t be right. How can costs vary that much? Let’s dive in for more details.

One option for building a new laundry is to purchase or lease an existing building and convert it into a new plant. This is called a laundry buildout. You’re starting with an existing building including parking, offices, docks, and other building components. Therefore, you only need to add the laundry infrastructure (i.e. utilities, floor trenches, pits, interior walls, piping, ducting, etc.) to turn the building into a new laundry. This reduces your scope and the associated construction costs (see Answer A.)

If the existing building is in rough shape, for example it needs a new roof or structural repairs, or if the building needs major upgrades such as new docks or on-site storm water retention, then construction costs will increase because you’re paying for building repairs and upgrades in addition to the laundry buildout work. You’re doing more construction work in the same space, so the cost per square foot goes up (see Answer B.)

Let’s say you decide to build from scratch. We call that a build-to-suit. In this case, you’re paying for the cost of a new building plus the cost of the laundry buildout work. Makes sense, right? If you don’t buy a building, then you must build one from scratch and that adds to the overall construction costs. But not all laundry build-to-suits cost the same. They fluctuate based on three key factors.

1. Building Size – The cost per square foot to build a large building, say 100,000 SF, is less expensive per square foot than constructing a small building. It’s all about economics. When you buy more building, you get it at a lower unit cost. Thus, a larger laundry has lower construction costs per square foot (See Answer C.)

2. Region – Construction costs are not the same across the U.S. They vary from market to market and tend to track cost of living. For example, construction costs are significantly higher in New York City and Northern California and tend to be lower in Texas and Florida. But you need to be careful. There is an exception to this rule. If a local market is “hot” (which is currently the case in Dallas and Orlando), costs will go up due to high demand. Therefore, an expensive market like NYC or a busy market like Dallas can lead to higher than expected prices (See Answer D.)

3. Equipment Quantity – The quantity of equipment you’re installing has a big impact on the cost per square foot. Let’s say you decide to build a new 50,000 SF laundry and it costs $130 per square foot. Your competition builds a 50,000 SF laundry across the street and it costs $160. Why did their plant cost more? Because they installed more equipment. Additional equipment means more trenches, pits, pipe, ducting, and electrical work even though the building size is the same. And as the industry finds more creative ways to fit more equipment into a smaller footprint, construction costs per square foot will continue to increase (See Answer E.)

Cost per square foot for a new laundry can vary greatly. Building size, existing conditions, equipment, and project location need to be carefully considered when developing accurate construction numbers. But there is one good rule to keep in mind: Just because your friend built his laundry for $125 per square foot, doesn’t mean you can build your new plant for the same number.