Let’s get into exactly what it takes to build a flex space real estate project. As you guys know, I develop and sell flex space projects, so let’s go over some basic costs so you can get an idea as to what it’s costing Hamza Invests to build our flex space projects, and how I go about underwriting these behemoth projects.
Now the price of the project will vary depending on where you are in the country, in some places building flex space is more expensive, and in other places your build will be cheaper.
There are three main costs to your project:
- Soft Costs
- Hard Costs
Here in Houston, you should be in and out of a project for about $80 a square foot. For example, let’s say you have a 20,000 square feet development. That’s gonna cost you a maximum of $2 million here in Houston at a hundred dollars a square foot. If you can build for $80 a square foot, you’ll come up with an even lower number than that.
Now, the way this is done and the way we calculate this, is to first look at the price of land, including soft costs.
What are the soft costs?
In your soft costs you have to include your engineering documents, your architecturals, your surveys, and any other tying fees that are associated with the lot.
It is extremely important for you to account for soft costs. A lot of people miss out on accounting for the soft costs and they end up making less money than they originally thought they would. My advice to you is to make sure that you have all your soft costs taken care of.
Next, you have your hard costs.
Hard costs include your concrete, rebar, doors, glass, insulation, electrical boxes, plumbing, HVAC, you get the point. All of these things are things that you need to include in the cost and account for when you’re underwriting your deal.
Here in Houston, when it is all said and done, my developments are costing me roughly between $80 to $100 a square foot. This is turnkey. This is what it should be costing YOU to build in Texas in general. Now, of course, if you’re in Florida, it will most likely be a bit more, if you’re in the northern states like Chicago, New York, Washington, it’s gonna cost you more than that. So be aware of what this kind of development costs where you are, and what your benchmarks are. If you want to make a 2-3x return on your development like I do, $80-$100 a square foot is the sweet spot.
To successfully underwrite your deal, you have to know your costs so you can calculate what your returns are going to look like. Costly mistakes will eat up your ROI if you’re not careful. That is why I created my mastermind, Flex Space Untapped, so I can share with my inner circle what I have learned in the past 8 years doing flex space developments. If you want to learn more, check out Flex Space Untapped.