Cost per square foot quotes — What is included?

Cost per square foot quotes typically do not include all the information you need to make an informed decision about proceeding with a new facility or with an extensive remodel.

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Jeff Carter, DDS, Pat Carter, IIDA, and Dave Fazio, AIA

For more on this topic, go to www.dentaleconomics.com and search using the following key words: office design, Dr. Jeff Carter, Pat Carter, Dave Fazio, project cost, decisions.

Cost per square foot quotes typically do not include all the information you need to make an informed decision about proceeding with a new facility or with an extensive remodel.

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Quoted “costs per square foot“ are of limited value, especially if they are presumed to include “everything.“ For example, you may assume a quote of $100 per square foot for a “new dental facility in a lease space“ is all the money you “need“:

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2,000 SF x $100 per square foot = $200,000 for “the project“

If so, you can invest time and significant sums of money signing a lease, purchasing property, forming a business partnership, or securing equipment “deals“ before finding out that your total project assumption falls short. The outcome can mean stalling the project until you acquire more dollars or stopping completely. Cost per square foot (SF) is ONE of six project cost categories for any project:

1) Construction costs — Cost per SF is included in this category but may be one of several construction cost line items. A completed space or building is typically assumed within a quote per SF (built-in cabinetry, lighting, ceilings, a finished interior — walls, doors, floors, etc.). Additional construction cost line items such as site work, HVAC systems, signage, sprinkler/security systems, and landscaping may not be assumed within this number and should be identified if they are not.

2) Soft costs — This category includes all professional fees for architects, engineers, interior designers, and other consultants. Also included are legal and accounting fees for work such as reviewing leases, land purchases, loan package preparation assistance, and interim financing costs and points on long-term loans.

3) Contingency — The Murphy's Law contingency is a well-advised “set-aside“ for all projects. Based on the level of service/documentation provided by your design professionals and the manner of pricing/management by your contractor, the contingency could be figured as low as 2% or as high as 50% of the anticipated construction cost.

4) Equipment and furnishings (FF&E) — It is very common for doctors to assume equipment and furnishings are part of a per SF quote. They are not. Dental equipment, technology products, furnishings, and artwork should be identified as a separate line item, for they can significantly impact a project's overall cost.

5) Real estate (for buildings/condos) — Condominium and land purchases are part of the total project cost. If paid down substantially, they can contribute to your project equity.

6) Finish-out allowance (for lease spaces) — Lease space options often offer finish-out allowances in the range of $10 to $50 per SF, which can reduce the overall project cost and contribute to your project equity.

The distribution of dollars invested in a dental office makeover will generally fall within the percentages shown in the pie charts (see page 22).

Assigning realistic dollars to all project cost categories can help you avoid dramatic lending shortages, dipping heavily into contingency funds, or stripping your project to “get it done.“

Identifying your cost distribution, planning accordingly, and managing the budget throughout your project are crucial if your objective is to complete your project at the “cost“ you anticipate.

Jeff Carter, DDS, Pat Carter, IIDA, and Dave Fazio, AIA, are owners of PDGFazio Design Group. Located in Austin, Texas, PDGFazio offers a full range of architectural, interior design, and consulting services to dentists nationwide. For more information, call (800) 511-7110 or visit www.pdgfazio.com.

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