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February 24, 2021

Many commercial businesses maintain warehouses to store inventory, assemble products, schedule shipments and receive deliveries. A warehouse enables businesses to manage their growth and offset any costs associated with inventory or product management.

Since a warehouse is a commercial building, the construction process mirrors the step by step commercial construction guide for any new building. By scheduling your development in sequential steps like this guide, you’ll keep construction on track, on budget, and in line with all recommendations from the key stakeholders.

But how much does it actually cost to build a warehouse? What are the costs to maintain the facility and establish a viable product assembly line? Let’s analyze some of those costs so you can finance your next warehouse construction project.

Warehouse construction cost per square foot

One of the best ways to calculate and manage construction costs is to determine the average construction cost per square foot. Commercial developers use construction costs by square foot to manage the development of new or renovated office buildings, and the same logic can be applied for warehouse construction.

To help set a baseline for construction costs, it helps to use data that highlights industry averages. Some cities help with this process by posting average costs to their own municipal websites. For example, the city of Brandon, Manitoba outlines commercial and industrial costs per square foot for a variety of sectors, including warehousing that ranges between $90 and $200 per square foot.

You can also determine warehouse construction costs in Canadian cities in comparison to other global cities. On Statista, numbers show that the average warehouse construction cost per square foot in Toronto is $98 US (approximately C$124). By comparison, the city of New York averages $117 per square foot (approximately C$148). Use these numbers to establish your own baseline as you finance your warehouse construction project so that you can manage costs and make adjustments to the development as needed to avoid going over budget.

Variable warehouse construction costs

Now that you have a baseline for your budget, it’s time to look at all of the costs you will incur as you develop the building. Like with any project, there are variable costs and fixed costs that must be part of your forecast.

Let’s first look at some of the variable costs that will be very important to the early phases of your construction timeline.

Metal warehouse building costs

Metal-framed or steel warehouses are very common options for warehouse developers. Steel is an affordable, functional, and versatile material that remains a very popular commodity. In fact, the global demand for steel is expected to more than double over the next 40 years.

Suppose your design encompasses a warehouse sized at 10,000 square feet. If you use steel or metal frames for the structural integrity of the building, you can help keep your average cost per square foot in line with your established baseline. Steel warehouses cost as little as $7 per square foot to develop and rarely exceed $20 per square foot.

Warehouse electrical cost per square foot

Utilities are expenses incurred in any building and warehouses are no exception. Electrical costs are always necessary for lighting, machinery, and all other aspects of keeping the warehouse operational so that business can be done.

There’s a great chart that visualizes the average commercial utility costs per square foot for a number of different commercial properties, and warehouses are featured on the list. Electricity is the largest utility cost incurred by warehouse properties, but the total utility costs average less than $1 per square foot to keep a standard sized warehouse operational. Use that information as your benchmark when you install and maintain utilities on the warehouse grounds.

Warehouse labour costs

According to Indeed, the average salary for a warehouse worker is approximately $16.40 per hour. However, salaries will vary depending on the job performed by each individual worker. For example, a delivery driver earns, on average, $21.31 per hour for the duties of his or her job.

You can also view a list of companies with warehouse labour that pay higher salaries to attract a higher quality of talent. Use all of this information to evaluate your options for skilled labour that will increase your quality of worker while maintaining a healthy fiscal budget.

Fixed warehouse construction costs

Now, let’s evaluate some of the fixed costs you’ll incur as you develop your warehouse. Many of these expenses are upfront costs that are part of the planning, design, and pre-construction phase of the warehouse development project.

Warehouse insurance costs

As a commercial building, warehouses store valuable products to maintain business operations, and they see a regular roster of employees coming and going on a daily basis. As the owner of the building, it’s imperative that you acquire the right type of warehouse insurance to protect the viability of the building, the products inside, and especially the people who work there each day.

A standard warehouse general liability insurance policy includes between $1 million to $2 million of coverage. On average, that policy will cost between $77 and $109 per month to maintain that coverage and protection.

Permit to open a warehouse

Permits are necessary expenses for any construction project, in any region. Many permit costs are broken down into various categories. For example, Ontario breaks down fees associated with construction permits into six groups that describe the types of buildings that qualify for a particular permit. Warehouses are part of Group F, categorized as industrial occupancies.

The permit fees for industrial occupancies cost as little as $7.50 and up to $15, depending on the size and parameters of the warehouse. The minimum fee for all work associated with the permit is $198.59, while an hourly rate of $85.79 is charged for examination and inspection services.

Warehouse drawing plan

Architects are the chief designers of any building specs, and their services do come with a steep cost. Fees for drawing plans alone can cost thousands of dollars to get the job done, and some architects even receive a percentage of the total construction cost for the project.

Their work is necessary to develop a blueprint for the final design, which is why it’s so important to select the right architect whose skills, experience, and expenses are the right fit for your warehouse construction project. Using a service like BUILD IT connects you to a wide selection of talented tradespeople and construction experts, including architects, who have been vetted and approved to provide their services for the types of jobs you need to complete.

Final thoughts

Your next warehouse construction project will help your business support clients far and wide all across the country. That’s why it’s so important to construct a building that is of the highest quality, and that helps you maintain those crucial client relationships.