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Sunday, 27 October 2013 22:00

Construction costs limit attractiveness of new buildings

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As developers face difficulty in financing projects, they’re also running into another headwind: The high cost of construction means new buildings have a tough time competing against existing facilities.

According to a Colliers International report on the third quarter industrial market in West Michigan, the average lease rate was around $3.40 per square foot for an existing facility.

That compares with a new construction cost of $4.25 per square foot at the least — given the developer already owns the land with no holding costs and that the building would be triple net leased, said Rick DeKam, principal of Midwest Realty Group.

“Right out of the chute, you’re already underwater,” he said. “We need to be building, but all we’re doing is taking old product and renovating it because we can’t (get) the money to get new product out there.”

Read 3570 times Last modified on Friday, 25 October 2013 15:08