One thing that everyone agrees on within the real estate industry is that in real estate “it is all local”. Each market and city has its own pricing, trends, building classifications, labor, and supply / demand. Cost estimating is no different. A cost estimator in Philadelphia could come up with two completely different numbers if they estimated the cost of the same project in another marketplace; like San Francisco for example. In order to come up with a complete and accurate budget for a project, it is important to know what is happening in your specific market.
Cost estimating is the development of a number for the total cost to complete a particular project. A complete, detailed cost estimate can determine the viability of a potential project and the availability of the budget and resources needed to move forward with it. Cost estimates made by a third-party owner’s representative differ greatly from those coming from a construction manager or engineering firm. Since the project manager / owner’s representative has oversight over a project’s big picture, it will incorporate those numbers into the overall budget beyond merely engineering and construction.
In order to ensure the accuracy of your estimation, it is important to ensure that it is based on the following local knowledge:
- Local historical data: utilizing the costs of past projects to come up with such line items as FF&E and IT.
- Local market conditions: costs of materials, labor, bonds, insurance, lead times, taxes, adjustments for inflation
- Standard measures: common use of structural steel per square foot, or HVAC costs based on standard BTUs
- Economic conditions that cannot be controlled: inflation, steel or concrete shortages, labor deficits
- Work hour requirements, schedules, and work-site access conditions.