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The Business of Commercial Construction

Commercial construction is the business of building and selling or leasing manufacturing or assembly plants, medical centers, retail shopping centers, and standard space for offices. The business varies primarily in the size and scale of the operations. Typically, the commercial builder either contracts with a company or organization to build the facility or builds the facility on speculation that it can be leased or sold at a later time.

The Commercial Construction Environment

Most commercial construction comes about as a result of a bidding process. An architect's design is let out for bid, competitors submit bids, and the one with the best cost and specification match wins the bid. Usually, but not always, the construction site is already known and secured.

Commercial building is driven both by business cycles and population growth. As more people move into a given area demand increases for existing work space. Schools, municipal buildings, retail stores, and offices become more fully occupied driving builders to build office and retail space to meet percieved demand. As the business cycle ramps up, new construction is ordered to provide space for workers and more frequent shoppers.

In today's commercial construction environment, many builders now specialize in a single commercial market. Some specialize in high-rize buildings, other hone their expertise in providing heavy infrastructure facilities like water treatment plants or dams. Still others may specialize in tilt slab construction. A certain amount of competitive advantage accues to those who have significant experience in a they type of commercial construction they are bidding on. In many areas this specialization can break down even futher with major parts of a construction project such as perimeter concrete fences being built by a company that specializes in building only this type of fence.

Builder's can smooth out inevitable work flow peaks and valleys by taking on projects to refit office space or other commercial buildings.

Overlaying all of this are building codes established by towns, cities, and counties. Typically building inspections are fully paid for by the builder in permit fees that can run 3 to 4 percent of the price of the building. Inspectors seem to have thier own timetables on getting out to approve sites so success often depends on building good relationshiops with the inspectors or developing political influence.

Keys to Success

Successful builders are those who can keep a steady stream of projects under construction. This allows for more predictability in the quality and availability of the needed labor. It also means that discounts can be obtained from suppliers who learn that they can count on a certain volume of business. Similarly, banks and lending institutions enjoy working with builders who are predictable in making their payments. As a result they are more willing to extend credit when it is needed. And successful builders build delays into their plans and schedules. They don't know if sickness or the weather will cause the delays but for sure something almost always does. Those who do it well also manage the expectations of their custoemrs. Setting unrealistic expectations for completion can result in some very unpleasant consequences for buyer and builder alike. Quality is another key to success that should not be overlooked. Those who do it right the first time don't have to take money out of their profits to make things right. Maybe, in the final analysis, the commercial builder must become the great communicator: needing to keep everyone up-to-date on the project status including, workers, sub-contractors, customers, banks, and building inspectors.


F. W. Dodge Analytics Here you will find current stats and trends on the health of commercial building industry in America.

International Design and Construction Online - Your gateway to everything and everyone dealing with the commercial construction industry.

A few who do it well:

Phelps Wood Architects - Frisco, Texas Specializing in municipal and recreational facility design.

Prism General Contractors This firm specializes in office build out, office finish out, office remodeling, smoking shelters, and ADA /TAD construction.

Copyright 2003 - 2012, Donald J. Bodwell.  All rights reserved. Email: Donald Bodwell