How Much Does it Cost to Build a Warehouse?
First, here’s what not to do:
Do not Google how much it costs to build a warehouse and just take that number as accurate.
While working on this post, I checked the current AI-generated answer and it was laughable. They put a 50,000 – 60,000 sf warehouse shell cost at around $750,000 - $1,000,000. Who can say what assumptions were made, but I can tell you that that number is impossibly low these days.
After two decades in the world of commercial real estate, I’ve learned my way around estimating the real costs to build a warehouse. What’s more, I’ve had the privilege of working with and learning from some truly great general contractors, like Arco Murray and Drew Gavic, who themselves have put out excellent content on this subject.
I’ve drawn on that experience to create this resource, explaining what you really need to consider for estimating the cost of your warehouse project. Read on to save yourself both headaches and money.
Assumptions and Total Cost
As with any real estate project, it’s critical to understand the Total Cost of your warehouse project, not just the construction costs. So, how does one get to the Total Cost of new warehouse construction? It starts with throwing away general assumptions. There’s simply too much nuance in warehouse construction for generalized estimates to be useful.
For example, say you and a contractor discuss the costs to build a shell building; seems simple enough, but wait. Are both sides discussing a cold shell or a warm shell? These mean two different things, with different assumptions on what level of finish will be achieved, which could mean just the structure of the building OR the structure plus some infrastructure (think heating/cooling, sprinklers, etc.) Assume the wrong type of shell, and just like that your calculations will be way off.
Only by considering all the necessary components of your specific project can you get accurate pricing. To that end, I’ve broken things down into some basic buckets below. These include areas that are too often overlooked when considering building a warehouse.
Land Costs
If you ask a GC (general contractor) for build prices, they are not likely to factor in land costs. So anticipating this is entirely on you, and the number will vary. For example, let’s assume you’re looking for a 10-acre site for a 100,000 sf warehouse building. While several 10-acre sites might be available, each one will be priced differently. The differences often come down to how much of the land is buildable, and the anticipated site prep costs. What’s more, you’ll also need to factor in the ancillary costs of reviewing contracts and other due diligence items.
Site Prep Costs
Even if all the sites you’re considering have similar amounts of buildable area, site prep costs can still vary. To understand site prep costs, one needs to consider:
Soils – Are the soils good for supporting your project? Does soil need to be transported to the site?
Grade – How flat is the land? Is significant grading required?
Utilities – Do utilities already reach the site, or will they need to be brought in? If so, how far?
Access – Is there existing road access to the site? If new or revised access needs to be developed, what are the permitting and construction costs?
Prior to going under contract, it’s only necessary to answer these questions at a high level – know what needs to be done and the general cost range for it. However, once you’ve entered a contract and are conducting due diligence, you’ll want to get these costs outlined down to as small a margin of error as possible before closing.
Municipal/Development Fees
Municipal fees are not new to anyone familiar with the development. That being said, cities have responded to the demand for industrial development by, in many places, increasing or adding fees to support growth and infrastructure, etc. Some common (and often “hidden”) fees include:
Park dedication fees
Sewer and water fees
Permit fees
In many places, these fees are not small. When planning, you ignore them at your own peril. Do your homework on anticipated fees.
Soft Costs
Soft costs have an appropriately hazy definition. For my work, I define them as all of the costs associated with a build that are not hard costs or fees. This can include:
Design work
Construction oversight
GC (general contractor) profit
A good General Contractor will include these costs and make them obvious from the onset, to ensure there is no ambiguity.
Hard Costs
After all that, only now are we getting to the actual costs for warehouse construction. That’s why I’m so adamant about emphasizing Total Cost – the reality is, the cost to build a warehouse includes so much more than just the hard costs of construction.
Construction costs are easiest to estimate when all the core components of a warehouse are broken out. With their permission, I’ve included Arco Murray’s Industrial Cheat Sheet to illustrate what a realistic breakout can look like. It’s one of the best visuals I’ve seen to help outline these costs.
2024 Twin Cities (Minneapolis-St. Paul) Industrial Broker Warehouse Construction Cheat Sheet
Please reach out to Arco Murray for more details on more accurate and updated costs.
Improvements Costs
Improvement costs are the costs associated with building above and beyond a basic shell. To get at the costs associated with a specific build, it’s critical to understand the warehouse’s intended use(s) and finishes.
How many square feet of office space will be needed?
Will said office space be strictly basic finishes, or feature high-end elements?
Will there be production space?
Will there be manufacturing space?
Does the end user need additional power, or installation and distribution of power lines, air lines or Cooling in all or a portion of the warehouse?
Will the warehouse walls and flooring be standard, or a higher-end finish?
What loading is required including levelers(and type) or full dock packages?
The more detailed the plan, the better a GC will do at pricing the improvements. Fail to include sufficient detail, and cost estimates can easily wander into wildly inaccurate territory.
It’s Worth the Effort to Get Your Estimate Right
Looking at all these different cost buckets, there’s no denying that estimating the cost to build a warehouse takes some effort. But the results of that effort is well worth it – a realistic, comprehensive cost estimate that you can base sound decisions on.
Are you interested in buying land and building a warehouse? Give our experienced team a shout! We’re happy to discuss your needs, any time.