The expenses involved in building a house can widely vary based on location, material prices, the house’s design and many other factors. Commercial and residential construction also have different sets of costs. These are the main costs associated with building each type of property that you should consider.

Residential Construction Costs

As of 2022, the average cost to build a residential structure is about $300,000 in most places. Most family homes are around 2,000 square feet, so the costs would equal around $150 per square foot. These are the main expenses that contribute to the final number.

1. 1. Land Preparation

Almost every construction project, residential or commercial, starts with a land purchase. You have to clear preexisting structures, vegetation, abandoned underground pipes and other obstructions and level the whole site. Undeveloped lots are usually less expensive than lots with remnants of old buildings that need to get torn down. Square footage also plays a huge role.

1. 2. Permit Acquisitions

Once the land is ready for construction, you have to hire contractors and architects to draw up the initial building plans. You will also need to pass inspections and acquire several building permits throughout the design stage. The project’s complexity and the building’s features will determine which permits you need. Each state has different safety requirements.

1. 3. Gathering the Materials

Once all of the contractors have the go-ahead to build, they start gathering the materials. Heavy equipment, hand tools and building materials get transported to the site. The subcontractors establish non-conflicting timelines for their specific tasks. They bring in storage units and security tools to protect the equipment and laborers.

1. 4. Building the Foundation and Frame

All of the prep work is now finished. The construction crew starts by digging and building the house’s foundation. There are four main types of building foundations: 

• Full basement
• Submerged crawl space
• Flush crawl space
• Slab-on grade

The foundation you choose will depend on your budget and long-term plans. Most homeowners choose full basements for the extra living space. The laborers then build the house’s frame with plywood and trusses. Naturally, homes with more square footage and complex floor plans have more expensive frames. The roof, windows and external walls come after the frame.

1. 5. Utility Installation

Once the main structure is complete, it’s time to install the main utilities. Plumbing pipes, wires and an HVAC system get installed and an electrician connects the house to the local power grid. The subcontractors can then add the toilets, sinks, light fixtures and other essential appliances that make our utilities work.

1. 6. Finishing Touches

The flooring, doors, insulation and drywall are installed. Cabinets and counters get drilled into their rightful places. Painters give the house some much-needed color. Exterior features such as landscaping, patios, porches and fences usually get added last so they don’t interfere with the main structure’s progress. These final touches are often the most expensive parts of the project.

Residential projects are more straightforward than commercial projects, so traditional building models with two-dimensional imaging tend to work best. Their simplicity keeps the project from getting too complicated and helps contractors consolidate their expenses. Residential contractors also have more experience with traditional models than commercial contractors.

Advanced building information modeling (BIM) that uses three-dimensional designs is also available. However, this technology is best utilized in a commercial setting, as you will see.

Commercial Construction Costs

Commercial construction projects have a much wider variance in size than residential projects, so it’s more practical to go by square footage. One square foot of a commercial space costs about $490 to build in the United States. These projects have similar expenses discussed above, but some unique factors may influence the bottom line.

1. 1. Building Type

There are many different types of commercial buildings, from office spaces to schools to entertainment facilities. Educational and healthcare buildings are on the more expensive side, while shopping centers and factories are usually cheaper. 

1. 2. Codes and Regulations

Due to their size, commercial projects have to follow many more codes and regulations than residential projects. They also have more restrictions on materials and equipment. Building techniques, heavy machinery, electrical wiring and plumbing systems all have mandated limitations to ensure worker safety and keep stakeholders happy.

1. 3. Decorative Finishes

Commercial buildings have many decorative finishes that can add another six figures to the project. More light fixtures, bathrooms, recreational spaces and ornamental features must take up the space. The HVAC, plumbing and electrical systems are also more complex. 

Unlike most residential projects, commercial projects greatly benefit from BIM systems that use three-dimensional designs. 3D images are necessary for buildings with many moving parts. They give construction companies a clear visualization of every feature, showing the workers exactly what they must do to match the design and cut unnecessary costs. 

Every Building is Unique

While there is undoubtedly a difference between the costs of residential and commercial construction, every building has a unique budget. It’s up to the property owner and their hired contractors to use the best resources available – including a state-of-the-art modeling system – to clarify the building’s design and reduce costs wherever possible.

Olivia Elsher is a Senior Writer & Editorial Manager at Renovated. She has over 5 years of experience researching and writing about construction related topics.