This post originally appeared on Orphan Road.
One issue that comes up frequently when discussing “towers” compared to shorter buildings is cost. Yes, taller buildings cost more. But not much more. And what you spend on construction can come back in saved real estate costs (since you can build more units with the same land).
Here’s some typical cost data from the 2011 RS Means*:
Apartments, Low Rise 1-4 story, $84/sf, $95,000 per unit
Apartments, Mid Rise 5-7 story, $107/sf, $118,000 per unit
Apartments, High Rise 8-24 story, $116/sf, $115,000 per unit
Don’t get too excited that the High Rise unit is actually cheaper than the Mid Rise, it’s clearly a smaller unit. The per sf number is more important. But either way, that’s a very small difference in price. And let’s compare that low rise number. It sure sounds cheap, but let’s run some numbers. Let’s compare 3 buildings: a 4 story, a 7 story, and a 24 story, each on the same piece of land – let’s say a 15,000sf piece of land (around 3 SF homes) that cost $4M to buy and clear. Let’s assume each unit is 1200sf.
4 story: $4M land cost, $5M construction cost, 50 units = $181,000 per unit.
7 story: $4M land cost, $11.2M construction cost, 87 units = $175,000 per unit.
24 story: $4M land cost, $41.8M construction cost, 300 units = $153,000 per unit.
Even at a higher per sf construction cost, the tall building wins.
*”The cost figures… were derived from aproximately 11,200 projects… they include the contractor’s overhead and profit, but do not generally include architectural fees or land costs.” These are also national averages – Seattle has a location factor of 105, so 5% should be added to any number.
If I had more time right now, I’d put all this info in for comparison:
http://dennytriangle.org/development
with King County info
http://info.kingcounty.gov/Assessor/eRealProperty/Dashboard.aspx?ParcelNbr=0660000835
For example:
The Olivian, land $6,580,000 (13160 sq ft), construction $40,000,000, 216 units = $215,277 per unit
Much higher land cost downtown of course, and they’ve got a floor of retail and 7 (!) stories of parking.
Interesting. It looks like about 20 floors of residential, making it right around 1,200 sf per unit. Means lists $83.50/sf for retail, though it doesn’t specify height so I’ll assume $115/sf for a high rise. Parking garages are $50.50/sf ($18,300 per car!) – I’ll assume that’s the same for any style, since they’re all concrete.
So… Means would say this building costs $7.7M for parking, $1.5M for retail, and $30.5M for housing. Add 5% for Seattle, and we’re at $41.7M. Pretty darn close to $40M, I’d say.
Note: A 1,200 sf unit is renting for about $2,700. That means, even assuming parking is free and retail somehow sits empty, it will take 6.6 years for the Olivian to make back all of it’s money on this building. Not a bad ROI in a down economy!
Yes, though of course it’s really more complicated than that. Owners probably have additional costs, building management for example, and possibly financing. That’s another thing, with the 12 unit total upfront costs are a few million total, especially if you’ve got a connection to an existing land owner. That’s a level of financing where you can get together a handful of investors, maybe even just a couple people like your aunt the successful businesswoman and cousin who’s got lucky with that early stock buy. Anecdotally I’ve heard that car-court townhome projects were mostly these side investments. A highrise obviously takes a major investor and professional developer.
I think you’ve dropped 3 stories from the low-rise building. 15,000 ft^2 * 4 /1200 ft^2/unit = 50 units, not twelve.
With that correction, the cost per unit comes out to $108,000/unit for the low rise building.
Thanks Ben! You’re half right. 50 units, yes. But I used the same bad square foot number on the construction cost, so it’s $5M. Total cost per unit: $181,000. I’ve updated the post.