February 05, 2012

Price Index of Input in Commercial and OfficeBuilding

Base: January 2012 = 100

As of February 2012, the price index of input in commercial and office building will be calculated. The period of the base: January 2012 = 100 points.

  • The largest expenditure in the construction of commercial and office buildings was for the concrete work phase – 21.4% of total expenditure.
  • The work phases of electricity, aluminium, air conditioning, and overheadcomprise approximately 12% apiece of the total expenditure,
  • The smallest expenditure of the building process is for the phases of construction and painting – approximately0.45% of total expenditure, apiece.
  • The expenditure for materials is 66% of total expenditure.
  • The expenditure for wages is 26% of total expenditure.
  • The expenditure for rented equipment is 5% of total expenditure.
  • Additional expenditures comprise 3% of total expenditure.

The Survey of Commercial and OfficeBuildings

The Survey Population and the Sample

The survey population included newly constructed buildings intended for use as commercial and office buildings, whose construction was completed from 2006 until 2009, and were larger than 500 square meters.

The file of the frame included 190 buildings. It consisted of the survey population less buildings that did not match the definitions, various errors, etc. The buildings larger than 2,000 square meters comprised approximately 81% of the total area of the buildings in the frame.

The sample was comprised of 135 buildings. All the buildings in the frame larger than 2,000 square meters were entered into the sample with certainty. The area of these buildings comprised approximately 87% of the entire sample area.

Data was obtained for 72 buildings, but it was only possible to use the data of 53 cases (approximately 40% of the sample, and approximately 65% of the area defined in the sample).

Components of Expenditure and Calculation of the Index Weights

The cost of a square meter of construction is determined by the following building components: Building structure, building nucleus, building envelope, primary electro-mechanical systems, finishing of public areas (see definitions in Appendix No. 1), and aboveground or underground parking garages.

Expenditure not Included in the Calculation

Finishing work in private areas is not part of the construction project and therefore this component is not included in the model.

Open outside parking lots are also not included as they are considered a part of development work and road-paving.

The model is based only on direct costs without consideration of company overhead and profits. Also, the model does not include cost componentsof the construction initiator, such as planning, management and supervision, advertising, etc.

The Survey Procedure

  1. The information was based on data from questionnaires that were transferred to the respondents. Two questionnaires were written, one for office buildings and one for commercial buildings.
  2. The information obtained from the responses was entered into a computerized model, a model that 'translates' the information into relevant monetary values. The entire project's work content was included in the model's list of work items. Every work input, material input, or service was priced appropriately.
  3. The size of the expenditure was calculated in correlation to the building characteristics in each one of the samples.
  4. Expenditure was inflated by weighting coefficients representing the presence of each building in the population.
  5. The expenditure total for each of the samples was summated, and weights were calculated for each of the inputs.

Questionnaire Structure

As previously mentioned, two questionnaires were written, one for office buildings and one for commercial buildings.

Each questionnaire consisted of sections corresponding to the various building phases: Excavation, retaining wall, structure, parking facilities, finishing of the building, systems, and site overhead.

The components of commercial and office buildings are the same, with the exception of the building finishing phase. As a result, the sections that relate to building phases are the same in the questionnaires as well. The finishing phase is essentially differentin office or commercial buildings, and therefore the section on finishing in the questionnaires was different for office or commercial buildings.

There are four types of questions in the questionnaire:

General Information Questions

General information questions include questions about the area of the building, number of stories, etc.

Yes/No Questions

These are questions about the existence of various building components that require no further information.

Example:

Does the building have drainage pumps? Yes No

Single Option Questions

These are questions about building components that have a number of mutually exclusive operational methods or possible materials. Option buttons were used for these questions; they were represented by blank circles that can be selected in the questionnaire.

Example:

Method of retaining wall formation (make only one selection):

  • Slurry wall
  • Dry-boring pile wall
  • Bentonite pile wall
  • CFA pile wall

Multiple Option Questions

These are questions about building components that have a number of operational methods or possible materials which can be combined. In these questions the respondent is asked to indicate all the relevant answers and to provide a breakdown by percentage for each one of the possibilities. Check boxes were used for these questions; they are represented by squares with inserted question marks.

Example:

Type of filling material (more than one choice may be selected, in which case the breakdown by percentage should be added):

Sub-base type A

Sub-base type B

Imported fill

Items List and Pricing

The items list includes the work phases that comprise the project's content. Each item has prices of the input that typifies it. The prices are the prices of June 2010 and the various items in the model were drawn from the chapters of the Blue Book.

The list has two types of items:

There are items with fixed characteristics and others with various operational methods and varying inputs. A questionnaire that includes the various possibilities for each item was prepared for the latter type of items.

In addition to the items of direct work, there are items that relate to the site's overhead cost. These items include the project's administrative staffand permanent equipment at the site which serves the entire project (such as cranes, elevators, mechanical engineering equipment, and office containers).

The model is based only on direct costs without consideration of company overhead and profits. Also, the model does not include cost componentsof the construction initiator, such as planning, management and supervision, advertising, etc.

Structure of Spreadsheets and Calculation Model

Each project included in the sample has a single Excel file.

The file includes the following components:

  • Computerized questionnaire
  • Model of calculation for the quantities of each item
  • Pricing model composed of items and inputs required for each item
  • Centralized spreadsheet of the general input distribution and the input distribution by Blue Book chapters

Findings

Expenditure for Main Categories

  • The largest expenditure of total expenditure per square meter of commercial and office buildings is for building materials, approximately 66% of total expenditure.
  • The largest expenditure in the category of materials was for iron and metal products, approximately 8%.

The expenditure for concrete, glass, elevators, prefabricated walls, pre-stressed concrete slabs comprises from 3% to 4.3%. Among the smallest expenditures were the expenditure for quarry materials and their transport – approximately 0.4%, sanitary fixtures – approximately 0.1%, and others.

  • The second largest expenditure of total expenditure per square meter of commercial and office buildings was for wages. This expenditure comprised approximately 26% of grand total expenditure. In the section of overhead, the expenditure for wages comprises approximately 56%. The highest wages were paid for the project engineer and the head work manager.

Enclosed please find Appendix No. 2 – Price Index of Input in Commercial and OfficeBuilding by Main and Sub-Categories.

Enclosed please find Appendix No. 3 – Price Index of Input in Commercial and OfficeBuilding by Main Categories.

Expenditure per Work Phase

  • The largest expenditure in the construction of commercial and office buildings is for the concrete phase – 21.4% of total expenditure.
  • The smallest expenditure in the building process is for the phases of construction and painting, which are approximately0.45% of total expenditure, apiece.

Enclosed please find Appendix No. 4 – Price Index of Input in Commercial and Office Building by Work Phase (Base: January 2012 = 100).

Average Expenditure per Square Meter in Commercial and OfficeBuildings

It was found that the average expenditure for construction per square meter for commercial and office buildings (not including VAT) is NIS 5,183. The breakdown of the distribution of expenditure is found in Appendix No. 5.