How Accurate Are Estimated Construction Costs Before Architectural Designs Are Completed?

When having a commercial real estate project completed, you understand that accuracy during each phase of the project is paramount. As projects commence, some parties will have estimated a budget they would like to stay under, while others have not yet determined a budget. However, budgets are largely subject to change, especially with how the pandemic has affected economies and industries around the globe, including construction financing. Obviously, estimates are not exact, so it’s important for you to understand how accurate these construction estimates usually are at each stage, and what can impact their accuracy.

The Importance of Accuracy During Construction Estimation

Estimation accuracy is important not only for you as a client or owner, but also for the real estate developer and construction company who is estimating the cost of your project. If the contractor gives an estimate that is too high, you as the owner ends up paying too much for the project, affecting your construction financing. This not only damages your budget, but it also negatively impacts the reputation of the contractor. Additionally, estimates that are too low create significant budgeting issues for owners. There have been many cases where an underestimated project results in higher running costs with a lack of capital to complete the project. The importance of accuracy cannot be overstated.

How Accurate Are Pre-Design Construction Estimates?

There are several factors that impact the accuracy of a construction estimate, especially when the estimate is formulated before the architectural design portion of the process. When a contractor has the official plans for the property that is being developed, it’s much easier to create an accurate estimate, including considering construction financing. However, without these plans, multiple factors can impact the estimate’s accuracy in a positive or negative way.

For instance, the reliability of the company providing the construction estimate will directly impact the reliability of the estimate itself. Estimates are generally based off historical data. For instance, if the contractor or developer has recently completed a project similar to the one they are being asked to estimate, they can use the historical data from that project to help formulate the present estimate. However, if the company providing the estimate has a history of low reliability or no recent projects similar to the one you are trying to build or develop, it would be safe to assume that the estimates that they provide will have inaccuracies.

The size of the project will also impact the accuracy of the estimate. Oddly enough, larger projects tend to have a smaller variance than smaller ones, thanks in part to the fact that contractors can obtain better pricing when placing a larger supply order. According to industry experts, companies who have access to reliable historical data can expect their construction estimates to be within a +/- 5-10% range, while smaller projects are typically within a +/- 15-20% range.

How to Get More Accurate Estimates

As a commercial real estate investor or occupied owner, you obviously want to have the most accurate estimates possible. While there is no realistic way to get estimates that are 100% accurate 100% of the time, there are steps that you can take to improve your odds of receiving an accurate, quality estimate. First of all, you should work with a firm who has a track record of providing quality work and accurate estimates in the specific type of project you are pursuing. For instance, building retail or restaurant properties can be much different than say an office or industrial property type. As already discussed, estimates are largely based off historical data, so working with a company who has accurate historical data can ensure that you receive accurate estimates.

Additionally, you should seek out a company that uses RS Means. RS Means is an estimate tool that many contractors use that provides historical data for construction costs in regions across the United States. Reputable companies will often use RS means on an as-needed basis to ensure that they are providing accurate estimates, which is beneficial for construction financing.

Finally, one of the most trusted ways to get accurate estimates as early as possible, is to choose a design-build project delivery method. Choosing a firm that specializes in the project type you are pursing is paramount to the project’s success and accuracy. Even in the design-build project delivery method, fully accurate construction costs are not able to be obtained until about 80-90% of the architectural and engineering construction working drawings are complete.


When you find yourself ready to develop a piece of commercial real estate, it is important to work with a company who has a proven track record of providing accurate, quality results, and can help guide you through construction financing. At SCGWest, we not only know how to create the architectural and engineering plans that you need for your project, but we also handle the development and construction portion of the process. Contact us today for more information on your project.

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