Let’s create a sample ground up project and see what a draft budget looks like at the highest level. While this is only an example, it is rooted in some of the basic economies of today’s market along with some recent precedence from actual projects, blended into a fictitious project. This will give you an understanding of the components of the draft budget as well as some real-life figures, laying a foundation of understanding project costs. 

Let’s assume we located a three-quarter acre site for a veterinarian in Cedar Park, Texas and put that land under contract with a 90-day feasibility period. During that feasibility we will work through civil engineering to determine the usability of the land, while the architect assists with the site layout and draft building design. Assume we determined that the site would accommodate exactly what the vet needed for her new animal hospital; 5,000 square feet. The site will require a detention pond since no shared, regional detention is available, and it is relatively flat with no significant trees in the way of the desired building location. 

The first trick is understanding that all costs should be converted into “cost per square foot of building” as we construct the draft budget. Land is usually quoted as a total price or a price for square foot of land. If so, we will need to convert that. Assuming the land price to be $10 per square foot, the total price of the land is determined by multiplying .75 acres times $10 per square foot times 43,560 feet per acre. That means the land will cost $326,700. The last step is to convert that to a cost per building square foot. Dividing $326,700 over 5,000 square feet of building results in a per foot cost of $65.34. We will round that down to $65 per square foot for our calculations below.

The next cost component is the site work. This is the process of turning raw land into buildable land. It involves installing underground water and wastewater lines, bringing electricity to the building pad, pouring driveways, parking and sidewalks, creating a suitable building pad with the appropriate type of soil, and so much more. This phase of the budget has significant swings, since there is n ot much you can do about the location of water (in front of the property or 300 yards away), a city required deceleration lane on the street, or soft soils that need to be cut and filled with suitable soil. This budget component is always the real gut check, and it requires skill plus experience to  get this correct. For our example, we assume the total cost will be $400,000, or $80 per building foot.

Now we work from our draft rendering, created by the architect, which also calls out the basic building materials, to establish our shell building cost of approximately $500,000, or $100 per foot. We use the same methodology for estimating interior finish out costs and determine the estimated cost to be $700,000, or $140 per building foot.

Adding all of these four components together (land, site work, shell building, and interior finish out) we arrive at our total cost of $385 per foot, or $1,925,000. 

One final point on this topic. The approach above includes hard and soft costs associated with a project. For example, the site work includes civil engineering and city impact fees. The shell building cost of $100 per foot includes the architectural plans and permits. However, there are some soft costs such as loan interest and interim taxes not included. A much deeper dive into the project budget will include those additional “development” costs.

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