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February 24, 2021

Grocery stores are vital to the fabric of society. They’ve been rightly recognized as essential businesses in the era of COVID-19, remaining one of the few types of businesses to consistently remain open throughout the pandemic. Naturally, the more options that people have to shop for essential items,  the more they can remain socially distanced and do their part to help curb the spread of the virus. Given there’s such high demand for food and household essentials these days, it makes sense for developers to consider how, where, and with what resources they can build a new grocery store. Foot traffic will remain high as groceries remain one of the few items people can and will spend their money so they can sustain themselves at home.

The question for any builder is how much does it cost to build a grocery store? If you have that intent, you need to know what your budget can afford so that you can hire the right tradespeople to bring your vision to fruition. Let’s look into some of the basic costs associated with building a grocery store to help you get a leg up on your development plans.

First of all…how big of a budget do you need?

In order to set a budget for the development, you need to decide what type and what size of grocery store you intend to build. This will also influence the construction work that needs to be done, including whether you should adopt a design build construction process to streamline various phases of the project.

As with any construction project, there are some fixed upfront costs that you need to allocate money towards just to get the project off the ground. According to Profitable Venture, some of those costs include:

 

  • Registration fees for the business
  • Licensing fees and permit costs
  • Insurance fees
  • Contractor fees
  • Developer costs
  • And much more

These are also examples of construction soft costs, which are non-tangible costs that aren’t directly related to the cost of construction itself. Nonetheless, these fees are necessary and must be incorporated into your total budget.

Depending on the size of the store, Profitable Venture recommends that you budget for up to $250,000 for a small independent grocery store; over $300,000 for a medium-sized business, and over $1 million for a large building. On top of that, if you franchise the Loblaw or Sobeys brand, you’ll require a much larger budget to build and operate under those established names.

Retail shell construction costs

There are two types of structures one can use when building a new grocery store. The first is a freestanding building with a retail store shell, and the second is space in a mall or civic centre that is leased out to a tenant to repurpose for their own needs.

For the freestanding retail shell construction costs, you want to break down your total construction costs and calculate the average commercial construction cost per square foot to set a baseline for how your project will unfold. This is a strategy used in the commercial office space sector, and the same model can be repurposed for a grocery store.

Once you have a baseline for the average cost per square foot, you can determine how to keep the costs for the retail shell space in line and on budget, which will help keep the entire project on target for completion.

Commercial fit out costs

If your grocery store is rented space within an existing freestanding structure, like a mall or a civic centre, you’ll need to absorb what are known as commercial fit-out costs. Fit-out costs are interior design work and renovations to the leased space in order to make it suitable for the grocery store to occupy that space. Much of this work may include refurbishments to match modern interior design trends that encourage people to enjoy the space within the store.

The CBRE Group, a leading commercial real estate services and investment firm, created commercial fit-out cost guides by continent to help developers establish a baseline for their own costs. The North American guide is available for download, which you can use to allocate funds and resources for your own fit-out costs.

Construction material costs

One of the biggest costs in your budget will be the material costs and the equipment used to construct the building. Things like concrete, steel, softwood, hardwood; all of these materials are significant chunks of your development budget.

Thanks to the coronavirus pandemic, there was a sizable production slowdown in many building materials throughout 2020. This is particularly true for softwood and hardwood lumber which, according to Electrical Business, softwood and hardwood production in April and May of 2020 were down 33.5% and 18.7%, respectively. This massive drop in production at the height of the pandemic resulted in a net increase in the cost of non-residential production costs by Q3 2020.

What does this mean for your grocery store development plans? It means you can expect to pay higher rates for the materials needed for the project. Make sure you hire a commercial manager who knows how to negotiate for the highest quality materials at the lowest possible price.

Construction labour costs

Like materials and equipment, labour costs are one of the biggest and most important pieces of your development project. From the supervising foreman right through to the general labourers, you want to hire skilled tradespeople who can get the job done to the highest standards. But you also don’t want the cost for good labour to blow a massive hole in your budget.

That’s why using a service like BUILD IT, which has access to a talented pool of vetted and skilled labourers, will ensure you get the best quality worker at the most affordable price. You can use our services to manage the tradespeople who will complete the work, and shift more of your own time towards the big picture of your business.

Final thoughts

Building a grocery store for your neighbourhood is an admirable prospect since everyone needs a place to shop for the household essentials. Depending on your approach to the construction, you could make your grocery store profitable much sooner than later.

If you follow construction best practices, you can go a long way towards keeping costs in line. You can also leverage services, like BUI.LD IT, to take some of the logistical burdens off your own shoulders so that you can focus more time and energy on preparing for opening day, and how to manage the store once it’s open to the public.

Together, this will help you bring your vision to life and turn it into a profitable venture that adds real value to your community.