Lab Construction Costs Up 6% for 2005

For a number of years, New York-based A/E firm HLW International (#27 on BD&C's Giants 2005 A/E list) and Accu-Cost Construction Consultants have kept tabs on lab construction and reconstruction costs.

Their data—based on in-house cost indices; review of contractor bids and the experience of a number of construction and CM firms (notably Bovis Lend Lease, Gilbane, Skanska, Torcon, and Turner); and analysis of labor rates, productivity data, and other nationally published cost data—is considered to be highly reliable.

In their most recent report, "Year 2005 R&D Facility Construction Cost Index" (April 2005), the authors forecast a 6% overall cost increase for R&D facility construction.

Their major conclusion: "The market is telling us that the era of low or no inflation is over."

This conclusion is based on a number of factors: inflation and cost escalation have hit the construction economy; higher commodity prices (for steel, cement, and oil-based products) are driving up costs; labor costs are on the rise; and volume surges in other sectors (notably housing, education, retail, and entertainment facilities) are creating a suppliers' market. Note, too, that their report was written before the recent spike in gasoline prices and Hurricane Katrina.

From their analysis, the authors see several new trends that could affect lab construction costs:

Excess R&D capacity in the pharmaceutical industry. The anticipated overbuilding of pharma labs has been anticipated but not fully quantified. They point out that it is difficult for Big Pharma firms to break up their campuses, and note that using existing facilities is usually cheaper than building new.

New, entrepreneurial players driving the market. There's a new class of players in the science facility market, so-called free-agent "trophy scientists," who have no trouble gaining access to capital. (The most notable examples might be Nobel laureates in chemistry, medicine, or physics who set up private research institutes.) Then there is a core group of developers whom are making inroads, some of who are using a new financing scheme known as enhanced-use leasing. (EUL allows the government to grant long-term leases to developers in order to develop underutilized government property. For example, the University of Missouri got a 33-year lease on 62 acres at Fort Leonard Wood to develop a technology park.) Stark and Gaughan foresee that the entry of new players like these will lead to an inevitable leveling and pass-through of costs.

More varieties, greater demand for biocontainment. With the construction of biocontainment facilities soaring, will there be enough qualified scientists and technicians to staff them? Biodefense labs come with a high degree of operational risk, they're expensive to build and operate, and they often face opposition from surrounding communities.

A new "arms race" in big instruments. Major universities, research institutes, and Big Pharma are plopping down big bucks for big, powerful machines—notably high-powered transmission electron microscopes, giga-Hertz nuclear magnetic resonance devices, and extreme-range photolithography equipment for nanobiotechnology. The buildings that house these highly sensitive instruments have to be bigger than most labs, with special attention to HVAC/utility support and vibration control.

The drive toward more equipment-based science. The hot fields of combinatorial chemistry, proteomics, genomics, and nanotechnology all require more and more equipment, higher ceilings for more overhead utility carriers, bigger fume hoods, more "churn" (turnover) in lab space, even better management of chemicals due to an increase in the amount of chemicals in the lab. Without appropriate design and programming, these somewhat hidden costs can drive up the price tag of a lab.

The cost of a new animal research model. Lab rats are getting fancier and fancier these days. "Specific immunosuppressed rodents" have become the new gold standard in bioresearch. They must be kept in high-density ventilated cage racks, which are space-efficient but require high-cost air handling and segregation/barrier schemes.

For more information, contact HLW managing partner Stanley Stark (sstark@hlw.com) or Accu-Cost's Ed Mermelstein (emermelstein@accucost.com).

2005 North American lab construction cost index
(percentage cost benchmarked against New York City metro area)

2005 international lab construction cost index
(percentage cost benchmarked against New York City metro area)

2005 R&D facility construction/renovation costs
(in dollars/gsf, indexed to NYC metro area)