Determining the accurate cost of building a new club is critical to successful budget planning and, therefore, the long-term success of a club. Compounding the issue is today's economic lending environment that still makes it difficult to acquire the proper funding. However, you can take certain steps to more accurately determine the cost of developing a new club.
Two types of new construction scenarios exist: securing space in rental property that will be built out for a club and building a club from the ground up on property you purchased.
The cost to build a club in a rental space ranges between $30 and $80 or more per square foot. Generally, low-priced clubs cost between $30 to $50 per square foot. Larger box club chains and franchises cost between $40 to $60 per square foot. Higher-end clubs cost more than $60 per square foot.
The wide range depends on the extent of the buildout (such as adding a pool, level of finishes and architectural details), the initial condition of the space and where the club is built. The costs I noted above assume that the starting point is a "vanilla envelope," meaning it has basic heating, ventilation and air conditioning (HVAC) plus an electrical box, basic ceiling and lighting, clean concrete floor, sheet rock perimeter walls and a bathroom that is up to code. If a building is not in this condition, then more items would need to be added for the buildout. Other variables that can add to the cost are demolition of existing space and mechanicals and other items that are not up to current building codes. The cost per square foot I noted includes plumbing (including fixtures), electrical, HVAC, walls, doors, windows, mirrors, lighting, ceilings, wall finishes (including paint and tile), flooring, millwork and design. Items such as lockers, furnishings and equipment are not included.
Building costs for existing rental space or new construction are affected by the geographical location of the club. Construction materials and labor for the Northeast and Northwest cost more than the Southwest or Southeast. Building a club in New York City is approximately twice the cost of building the same type of facility 100 miles outside of the city.
The cost for a new building from the ground up is between $100 and $200 per square foot or more (excluding land) and would also include the buildout. The cost of the building shell (foundation, walls, roof and basic mechanicals) to the point of vanilla envelope condition can range between $75 and $125 or more per square foot. The type of building construction, such as a metal or block building, also affects the cost.
The new building variables that affect the total cost are condition of the site (some areas such as New England have a great deal of rock to deal with, where Texas would have minimal), environmental concerns (one project had to spend $90,000 to move turtles from the property to a new environmentally approved location), more code issues (such as how much landscaping needs to be included) and structural issues. New construction also requires more professional fees, such as a structural engineer and a site engineer. You also must get more permits such as permits for utility hook-ups, traffic impact studies and environmental concerns.
Ground up construction has the potential for considerably more unexpected costs and longer development times. The advantage is that you own the building as a real estate asset.
The steps to getting the best bid (and detailed cost) for a club is to first create a detailed set of plans. Any estimate without working from a detailed set of plans is just that—an estimate that can, in the end, cost as much as 10 percent to 40 percent more. Every design, mechanical and structural (if it applies) aspect of the club needs to be on the plans. This enables the different bids to be for the exact same set of specifics so you can compare. Most often it is best to get three bids.
If plans do not contain all the variables, then a bid will not be accurate and costs will change—usually requiring a change order. If a lot of details are left off the plans (because of insufficient design or requested design changes by the owner), then the cost can noticeably increase.
Often, the first step to getting a general idea of the cost is to create a basic layout that includes a general floor plan showing what will go into the club. Giving this basic layout to a contractor or landlord (who may be willing to provide tenant improvement dollars as part of the lease deal) can help to determine a rough estimate of the potential cost per square foot.
When in the bidding process, select designers and contractors that you are referred to and then do additional reference checks. Often, a noticeably lower bid can result in poor workmanship and a higher price in the end.
Once you receive your bids, review them in detail with the contractor and your architect/designer to make sure the bids include everything that is shown in the drawings and specifications.
If all the bids come in too high, then you may need to cut costs with different aspects of the buildout. The term used for this is "value engineering," which refers to mechanical and structural costs but also can refer to finishes, flooring and other items.
Proper planning is a must for building a successful new club. It is an involved process and takes quite a bit of work and patience. Despite all the best planning, you should allow for an additional 10 percent contingency amount because no matter how much you plan, something will not go according to plan. The more you work with proven design and construction professionals (preferably with health club experience), the more successful your end result will be.
Bruce Carter is the president of Optimal Fitness Design Systems International, a club design firm that has created about $650 million worth of clubs in 45 states and 26 countries. He can be reached at firstname.lastname@example.org.