Budgeting for a Building Project: What You’re Probably Forgetting

When planning a commercial building project—whether it’s a new development, a renovation, or an addition—most people tend to focus on the obvious: materials, labor, and construction timelines. But if that’s where your estimating stops, your budget is likely missing key components that can seriously impact your bottom line.

Here are some of the most overlooked budget items and why they matter:

Soft Costs: More Than Just a Line Item

Soft costs are the non-physical expenses that are essential to any successful project. These include:

• Architectural and engineering fees
• Permitting and municipal review costs
• Legal and financing fees
• Environmental assessments and abatement
• Insurance and administrative expenses

Unlike hard construction costs, these often come early in the process—and can add up quickly. For commercial building development, soft costs can account for 20–30% of the total project budget.

Tip: Always confirm whether these services are included in your proposal or need to be contracted separately.

Cost Escalation: Prices Are Not Static

Construction pricing rarely stands still. Between inflation, supply chain fluctuations, and market demand, the cost of materials and labor can rise—even over the course of a few months. If your project won’t break ground for 6–12 months, those changes could push your budget over the edge.

Best Practice:
Factor in a cost escalation percentage (typically 4–8% per year) as part of your estimating strategy, especially during preconstruction planning. Working with a firm that monitors market trends can help you stay ahead.

Contingency: Planning for the Unknown

Contingency isn’t a safety net, it’s a necessity. Even the most well-planned commercial construction projects face change orders, site surprises, or shifts in scope.

There are generally two types of contingencies to plan for:

• Design Contingency: To cover revisions or incomplete details during early design phases
• Construction Contingency: To cover unexpected issues during the build

Rule of Thumb:
Include 5–10% of your total construction cost as contingency, depending on the project’s complexity and how far along you are in design.

Site Development and Utility Costs

It’s easy to assume the site is “ready to go” but that’s rarely the case. Site prep often includes grading, soil remediation, stormwater management, and extending or upgrading utilities.

In commercial development, these hidden costs can become major budget busters if not addressed early.

Checklist for Your Estimator:

• Are there geotechnical studies available?
• Are new utility connections required?
• What is the topography and soil condition?

Furniture, Fixtures & Equipment (FF&E)

If your building needs to be move-in ready—think desks, appliances, signage, tech systems—those costs won’t be part of the base construction number. But they’re essential to occupancy.

Especially in commercial office, healthcare, senior living, and retail spaces, FF&E should be a separate budget category with its own estimating process.

Wrap-Up: A Smarter Approach to Development Budgets

Successful commercial building projects don’t just rely on a good contractor—they rely on smart, complete preconstruction planning. At Iconica, we take a fully integrated approach to budgeting that includes all phases of development, not just the design or build.

Whether you’re early in the vision stage or already reviewing proposals, our team can help you develop a comprehensive budget you can trust.

Ready to build smarter? Let’s talk. Iconica’s team of architects, engineers, and construction experts work together from day one to help you avoid surprises and get your commercial project off the ground with confidence.