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Market Snapshot: Most Expensive and Affordable Cities for Construction (2020)

Looking to grow your business to new markets? Before you bring your real estate project somewhere new, it’s a good idea to get a lay of the land look of construction pricing across the nation to compare your own budget across regions.

Here are the latest most expensive and affordable cities to build in according to ARCO-aggregated data from RSMeans and ENR factoring 292 markets (Note: numbers listed below are pre-COVID and regional impacts are still being determined):

Top 10 Most Expensive Cities to Build In (Ranked in Order of Most New Construction Starts)

Rank City Regional Escalation*
Baseline Indianapolis 0%
1 New York, NY 42.1%
2 San Francisco, CA 30.8%
3 Chicago, IL 28.3%
4 Boston, MA 24.6%
5 Philadelphia, PA 22.6%
6 Los Angeles, CA 20.4%
7 San Diego, CA 17.9%
8 Minneapolis, MN 13.4%
9 Seattle, WA 12.2%
10 Oregon, PN 8%

Top 10 Most Affordable Cities to Build In (Ranked in Order of Most New Construction Starts)

Rank City Regional Escalation*
Baseline Indianapolis 0%
1 Austin, TX -16.4%
2 Houston, TX -16.2%
3 Dallas, TX -15.6%
4 San Antonio, TX -15.5%
5 Nashville, TN -13.7%
6 Atlanta, GA -13%
7 Orlando, FL -12.9%
8 Tampa, FL -11.6%
9 Miami, FL -11.6%
10 Phoenix, AZ -10.9%

Factors Contributing to Cost Escalation

Apart from the myriad of factors contributing to your individual project’s construction costs, these are the culprits for increases and decreases to construction affordability from metro area to metro area:

1. Union domination

Are local contractors required to be signatory to union labor in a particular region? If so, expect to see higher costs as a result. In contrast, markets that allow for an “open shop” approach where a national contractor can bring less expensive subcontractors to another territory may help alleviate regional costs based on labor. If you’re able to use this approach, be weary of how this could upset local unions.

2. Access to Materials

Understandably, the cost of shipping and production varies from location to location, playing a significant role in your total construction costs. Places like Honolulu are high up on the list of construction-expensive cities because of its isolation and lack of easy access, whereas parts of Texas that already benefit from low taxes and business-friendly laws might also be better positioned for procurement routes and manufacturing.

3. Less labor/less market competition (proportionate to the construction unemployment rate)

Obviously more subcontractor competition means better pricing—if a market is not in demand for construction, you may find yourself with higher pricing from local subcontractors. However, markets with a lower rate of construction starts could result in aggressive subcontractor pricing and potentially reduced subcontractor reliability.

Conclusion

If you’re entering new territory for your developments, don’t assume that your project costs will look similar from one market to the next. Consulting with a national contractor can help you anticipate regional escalation in your prospective markets to narrow your search for a new project site.

ARCO/Murray is a national design-builder with over 26 years of multisite construction experience. With in-house capabilities for preconstruction and development and engineering and design in addition to construction management, we help our clients execute high volume pipelines across the nation for the best value and highest delivery quality. 

Looking for the right design-build partner? Experience a better way to build: partnerwitharco@arcomurray.com