On more and more occasions we are being asked to provide indicative m2 rate analysis for our Clients or Financiers at the early design stage of a new construction project (either before or during the development application has been submitted). Many factors such as site specific conditions, construction methods, level of finish and timing will greatly affect a standard cost per m2 approach.
At feasibility stage, generally, most building costs are formulated on a cost per m2 basis that has been derived from either an industry recognised costing book (such as Rawlinsons or Cordells), a previous project / benchmarking or simply industry æhear say’. This approach can be very dangerous if you don’t understand exactly what the rate is based upon (ie: GFA, FECA or NLA) does it include for the basement and the balcony areas, deductions for voids or openings?) which can lead to significant impacts on your projects feasibility. Remember that a variance of a couple of hundred $/m2 could result in your project not making it past feasibility stage, or worse, costing you time and money to develop the design only to find out that it just doesn’t stack up!
This lack of understanding can also have a significant impact on specialised or smaller scale projects because they are more cost sensitive. For example, when you look at Social Housing projects, there is usually a higher density of units within a smaller building area. Although the cost per unit may be less than that of more conventional housing or residential projects, the cost per m2 can be significantly higher due to the inclusion of additional dividing walls, kitchens, more fittings etc. These factors need to be considered at the feasibility stage to avoid cost blow-outs. Likewise, a small æhigh end’ residential renovation based in and around CBD suburbs will have a significantly higher cost per m2 rate than a new residential dwelling away from the CBD.
Quantity Surveyors are construction cost experts and it’s important to get them involved in the early stages of your project so a more detailed cost estimate can be obtained. The cost per m2 approach has a place in our industry but should only be used to give a æballpark’ cost figure at the early design stages.
For more information on risks associated with a cost per m2 approach contact myself, Andrew Opperman, Mitchell Brandtman, 02 9525 8000.