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Commercial Construction Costs: Market Trends

June 2, 2023

Commercial construction costs have risen steadily in recent years, with some estimates indicating an increase of up to 5% per year. While the specific cost increases can vary depending on the region and the type of construction, there are several factors that are contributing to these rising costs.

Why Commercial Construction Costs Are Rising

Labor Costs

The cost of labor is one of the most significant factors impacting commercial construction costs. With low unemployment rates and high demand for skilled labor, general contractors are often paying more for qualified workers. This has led to higher wages and benefits, which can significantly impact overall project costs.

Material Costs

The cost of building materials has also increased in recent years, with some estimates indicating that material costs have risen by up to 8% per year. This is due in part to the rising demand for building materials, particularly in the wake of natural disasters and other events that require extensive rebuilding efforts. Additionally, tariffs, interest rates, and other trade policies can also impact the cost of construction materials, particularly those that are imported from other countries.

Government Regulations

Changes in government regulations can also impact commercial building costs, particularly when it comes to safety and environmental regulations. Compliance with these regulations can add additional costs to a commercial property project, particularly if extensive testing or remediation is required.


While technology has the potential to streamline the construction process and reduce costs, it can also add costs in the short term. For example, implementing new technology like Building Information Modeling (BIM) can require additional training and investment in software, hardware, and other resources.

Key Takeaway: Commercial Real Estate Development Requires Planning

The rising costs of commercial construction are impacting projects of all square footage across the country, with labor costs, material costs, and government regulations all contributing to these increases. As a result, it’s important for contractors, developers, property managers, and other stakeholders to be aware of these factors and take them into consideration when planning and budgeting for commercial construction projects.

While rising costs can be challenging, there are also opportunities to explore new technologies, materials, and building methods that can help reduce costs in the long term. By staying informed and adaptable, the commercial construction industry can continue to thrive and meet the evolving needs of businesses and communities.

Commercial Real Estate Construction Solutions in Michigan

Farbman Group partners with Huntington Construction to offer commercial real estate construction solutions throughout the Midwest. Contact Huntington Construction online or call John Line, Executive Vice President, (248) 781-2576 for more information about construction services.

Categories: Blog Post