Your contractor's first quote is a starting position. Here's what the actual line items look like — and which ones you should fight for.
When an operator starts planning a new location, the first thing they usually do is ask a general contractor for a number. The GC looks at the square footage, maybe walks the site, and gives them a figure. It sounds specific. It usually isn't.
I've been in commercial construction for 24 years. I've managed or overseen more than 500 projects across 15+ states, and delivered something north of $770 million in work. In that time, I've watched operators get into trouble in the same ways, on the same line items, over and over again. The contractor's initial estimate is rarely the problem. The problem is operators treating it like a commitment rather than what it actually is: a first draft.
Let me show you what a real $5 million build looks like, line by line, and where the money actually goes.
The structure of a $5M build
A $5 million commercial build — think a standalone restaurant, a fitness facility, a healthcare clinic, a specialty retail space — breaks down roughly like this:
Site and civil work: $400,000 to $600,000 (8-12% of total)
This is everything from the curb to the foundation: grading, utilities, drainage, parking lot, landscaping. Site conditions drive most of the variance here. A clean, flat site in a developer's pad-ready condition comes in at the low end. A site with significant grading work, existing utility conflicts, or environmental unknowns can push you to the high end or beyond. The Phase I environmental assessment exists for this reason — you want to know what's under the ground before you start digging.
Structure and shell: $1,250,000 to $1,500,000 (25-30% of total)
The building itself: foundation, structural steel or wood framing, roofing, exterior walls, windows, and doors. This is the most predictable bucket, but it's also where supply chain volatility shows up first. Steel prices have moved more than most operators expect over the last five years. Lock in your structural pricing as early as the process allows.
Mechanical, electrical, and plumbing: $1,250,000 to $1,500,000 (25-30% of total)
This is the one that surprises operators most consistently. MEP — mechanical, electrical, and plumbing — runs 25 to 30 percent of a typical commercial build. Most operators budget 15 to 18 percent because that's what they heard somewhere. The gap between what they budget and what it costs is real, and it usually shows up in month seven.
The reason MEP runs expensive: building systems are complex, code requirements are increasingly stringent, and the tradespeople who do this work are in short supply in most markets. You can value-engineer some of this. You cannot value-engineer your way to 18%.
Interior finishes: $750,000 to $1,000,000 (15-20% of total)
Flooring, ceilings, walls, millwork, fixtures, paint. This is the bucket most visible to customers and most subject to the operator's design preferences. It's also where value engineering conversations get emotional — operators care about how their space looks. That's fine. The discipline is knowing which finishes move the customer experience needle and which ones are expensive and invisible.
Furniture, fixtures, and equipment (FFE): $250,000 to $400,000 (5-8% of total)
This category gets underestimated in early budgets because it feels like it comes later. It doesn't. FFE lead times in the current market range from 8 to 24 weeks depending on the product. If you don't order early, you have a building with no equipment, and a general contractor billing you for days of delay that aren't his fault.
Soft costs — design, permitting, fees: $400,000 to $600,000 (8-12% of total)
Architecture, engineering, permitting, inspections, legal, and owner's rep or CM fees. Operators routinely underestimate this because the design fees seem small early and then compound. A typical set of construction documents for a $5M commercial build costs $80,000 to $130,000 in design fees alone, before you've filed a single permit application. Add municipal permitting fees (which vary wildly — some jurisdictions are $15,000, some are $45,000), inspection fees, and the time cost of plan review cycles, and soft costs run 8 to 12 percent in most markets.
Contingency: $400,000 to $500,000 (8-10%)
Most operators budget 5 percent. The construction industry standard is 10 percent. The gap matters most when something actually goes wrong — and in a construction project, something always goes wrong. The question is whether it costs $15,000 or $150,000.
Contingency isn't pessimism. It's math. A contractor who tells you he can build without contingency is either using your money as his buffer or hasn't done enough projects to know what happens when the site conditions are different from what the geotech report showed.
The line items operators consistently underestimate
Every project has its specifics. But in 500+ projects, the same categories consistently blow up. These four, in order of how often they create problems:
1. MEP
Always. I said it once and I'll say it again: if your MEP budget is below 20 percent of total construction cost on a commercial project with kitchen equipment, HVAC demands, or medical-grade power requirements, re-run your numbers. Your contractor didn't forget anything — you're looking at a number that doesn't include what the building actually needs.
2. FFE with long lead items
A commercial kitchen range hood, a specialized HVAC unit, custom millwork, or branded equipment for a franchise build — these have lead times that routinely exceed 16 weeks. Operators order too late, the project reaches substantial completion, and the CO is delayed because the equipment isn't in. Delay costs money. The trades come back. The contractor bills for remobilization. It's avoidable.
3. Soft costs
Operators see "architect: $85,000" and think they've got soft costs covered. They don't. Add MEP engineering, civil engineering, geotech, permitting fees, third-party inspections, permit expediter fees (in municipalities with long review cycles), and the CM/owner's rep function, and soft costs reach 10 percent on most projects. Budget for the total category, not just the design fee line.
4. Contingency
Covered above, but worth repeating: the 5 percent contingency becomes the 10 percent contingency after the first big RFI comes back with unexpected site conditions. Budget 10 from the start and give yourself the choice of finishing under budget rather than scrambling to find the gap.
A value engineering example
On a recent project — a 4,200 square foot QSR build, total budget $3.8M — the initial MEP estimate came in at $1.1M, which was 29 percent of total cost and above the owner's target. We ran a value engineering analysis focused on the HVAC controls package.
The original specification called for a manufacturer's proprietary direct digital control (DDC) system with remote monitoring. The spec made sense for a large multi-story commercial building. For a 4,200 square foot single-story restaurant with a simple rooftop HVAC array, it was over-specified.
We re-spec'd to a different control architecture that met the code requirements and the owner's operational preferences at significantly lower cost. The HVAC subcontractor re-bid at a savings of $62,000 on the controls package alone. The owner got a system that performs the same function in this building type. We delivered the VE within two weeks of the initial bid.
That's what value engineering looks like: not cutting what the building needs, but identifying where the specification is optimized for a different project than the one you're actually building.
The honest constraint
CM doesn't eliminate overruns. It reduces them by catching the predictable ones before they hit.
A good owner's rep function — someone in your corner who reads the RFIs, tracks the submittals, manages the pay applications, and knows when the general contractor's schedule is slipping — will save you more than the fee costs. Not because they're magicians. Because the construction process has a lot of moving parts, and the most expensive problems are the ones that go unaddressed because no one was watching.
What CM can't protect you from: site conditions you didn't discover before signing the AIA contract, material price spikes that weren't in the original bid window, contractor performance failure. Those are real risks in every project. The discipline is pricing them into your contingency before you start, not hoping they won't happen.
What you should ask your GC before you sign
If you're in planning on a new build and you've received a contractor proposal, these are the questions worth answering before you execute:
What's included in this number and what isn't? Ask for a scope inclusions/exclusions list. The number is meaningless without it.
What's the contingency assumption in your estimate? If the answer is 5 percent or "it's built in," ask them to break it out. Know what buffer you're working with.
What's the lead time on the long-lead equipment items? If the GC can't tell you the lead time on your HVAC units and kitchen equipment within a week of receiving the estimate, they haven't priced the project — they've priced the building.
What permits are included, and which aren't? Some contractors include permitting. Some don't. Some include the municipal fees. Some don't. Get a list.
What's the basis of your MEP estimate? A ballpark percentage? A subcontractor quote? A detailed takeoff? The answer tells you how confident you should be in that line.
There's nothing mysterious about what a $5 million commercial build costs. The numbers are relatively predictable if you know which categories to budget correctly and where the common gaps appear. The discipline is building the budget from reality, not from hope.
If you're in planning on a build and want a second set of eyes on the numbers before you commit, that's a conversation worth having early — when there's still time to adjust the scope, not after you've executed the GC contract.
Planning a build-to-suit? We work with operators at every stage of the development process, from site selection through certificate of occupancy. If you want a read on your budget or your contractor's proposal, reach out.