Commercial Construction: Everything You Need To Know For 2021
Commercial construction can sometimes feel like a confusing or mysterious industry. There’s always a lot of work that needs to be done to complete large projects, but what really goes on? What company handles all of the processes? And who’s responsible for the job getting done on time?
Those are some of the questions we’ll be answering today as we try to shed some light on what APX Construction Group is all about. As a leading commercial construction company in the greater Minnesota area, it’s important that more people understand what we do.
General Construction vs. Commercial Construction
Commercial construction and general construction projects are both different processes and can relate to different items altogether. It’s important that you understand the differences to at least some degree.
We like to think of general construction as the catch-all term whenever there isn’t a need for things to be very specific. General construction can include different jobs and projects within both commercial and residential construction. It’s commonly understood that general construction can be broken down into four subcategories. These subcategories are state, federal, residential, and commercial. Most construction companies are niched into at least one of the four above categories.
Commercial construction can be viewed in a few different ways. Projects are differentiated by size and scale and are always funded by the private sector. The commercial construction industry is the largest commercial sector in the U.S., excluding healthcare and government sectors, with over $230 billion worth of projects completed every year.
Different commercial projects include remodeling, updating, redesigning, and new builds. Renovations and expansions are also prevalent commercial construction projects that help to ensure the properties are kept up to date. In addition, as buildings age, they need regular maintenance and care to ensure that everything is looking good and stays in pristine condition.
Types of Commercial Construction
As mentioned earlier, commercial construction is broken down into different types of projects. Some commercial buildings are also classified as commercial mixed-use, meaning they have a commercial and residential component. For example, retail stores may occupy most of the space on the ground level, while apartments or offices might be located upstairs.
Projects are classified based on the scope of work that needs to be done and what the building will be used for. For example, building a hospital will be a large-scale medical project. But, renovating a small office is simply a small-scale office project.
Small-scale projects typically include properties that are smaller in size and don’t require a commercial general contractor. This could include commercial retail, commercial office space, small commercial mixed-use buildings, residential additions, or renovations under 500 square feet in size. Another way to refer to smaller-scale jobs is as light commercial construction
Medium-scale projects include commercial retail, commercial office space, and commercial mixed-use buildings with 500 to 50,000 square feet. These can be new builds (although it might be considered large-scale), remodels, renovations, or additions on a new build. A medium-scale project will be more expensive and time-consuming and will almost always require a full crew.
Finally, commercial retail structures over 50,000 square feet in size or commercial, industrial building projects consisting of multiple entrances all within the same building are considered large-scale. A large-scale project can range from skyscrapers and highrise apartments to Walmart and other big-box retail shopping centers. The uses for these buildings and the time frame it will take to build them can help better define how “large” of a scale the project really will be.
Commercial Construction Financing
Before you can undergo a commercial construction project of your own or for your company, you’ll have to come up with financing for it. There are many different ways that commercial companies determine financing and funding for a construction project. Here are the most common options:
- commercial construction loans
- commercial mortgage financing
- commercial bridge financing
Almost all commercial construction projects are going to require financing of some kind. But, unfortunately, it’s unlikely that your business will have enough cash on hand to fund the project, and investing all of your capital at once isn’t always the smartest move.
Commercial loans are a form of commercial construction financing that is offered by financial institutions and commercial banks. This type of commercial construction financing is the most common and can be used for all types of commercial construction projects. The process of securing the loan is as simple as applying for it at a local financial institution.
This form of commercial construction financing is less common than commercial loans but works similarly in that they are secured against the property being built or renovated. A bank will provide a loan with a set interest rate and repayment schedule, which must be repaid before getting your building back from the contractor after it’s been completed.
Commercial mortgages work best when there is no underlying equity on an existing structure since this eliminates some steps involved in getting approval for such a project. It also helps if you have collateral worth more than twice the value of what you’re borrowing because lenders require additional compensation at the time of commercial mortgage approval.
Commercial Bridge Financing
This commercial construction financing can be offered by a commercial bank or commercial lender, and it is typically used for small-scale commercial projects, such as retail stores or restaurants. A commercial bridge loan will provide the borrower with a set amount of funding upfront to help cover initial expenses related to starting their project.
At the same time, they work on finding additional sources of commercial construction financing like loans from financial institutions or private investors. This type of commercial construction financing usually comes at an increased interest rate because the funds will only be available for a limited time period.
Commercial Construction vs. Residential Construction
Commercial construction is different from residential projects because it’s usually much larger and more expensive. Additionally, commercial work may require a team of subcontractors to complete the project instead of a single contractor that does all of the work on a smaller commercial job.
Along with the larger projects, some other rules and regulations must be followed for commercial projects. One such regulation that’s important but not at all part of a residential building is ensuring that commercial buildings are handicap accessible and ADA compliant.
Residential construction also doesn’t need extensive permits or zoning. At least not to the degree that commercial projects are planned. Some commercial projects can take upwards of 5 years to go through all planning and permitting processes.
Commercial Construction Process: An Overview
There’s a lengthy process for a commercial construction project. Each commercial construction project usually involves a commercial contractor, commercial architect, and commercial engineer. These teams can be housed within one company or can each be separate companies all working together. At APX, our team can take care of every part of the project from start to finish, saving you time and money in the long run.
After you’ve decided where you’d like to build, the first step in the process is to get the necessary permits for any project. Once you’ve obtained all of these legal documents, you can start looking into financing options so that your company has enough money on hand to cover construction projects and design costs.
After you’ve secured the land and a loan, you’ll be able to start working on the rest of the project.
Here are the steps as they work through the process.
- Find a location
- Set a budget for the project
- Start designing the structure and its elements
- Commercial engineering (civil and structural) plans
- Commercial architectural drawings
- Planning approvals from cities and zoning commission
- Commercial building permit secured
- Start construction
- Post-construction finishing touches
- Interior design and decorating
We won’t go too into depth on each of these objects, but as you can see, building a commercial space is no small job. It’s a much different process than a residential building because you’ll have to complete all of the standard objects along with the extra time, cost, and size of the project.
If you’re looking to get started on a new commercial building project, then reach out to us. APX Construction Group can help guide you through the project from start to finish. We want you to feel comfortable as you start in on this journey and take a step forward for your business. Be sure to also check out some of the projects we’ve completed in the past.