What % markup would a typical Austin general contractor charge?

Question

Hi everyone, I have a project coming up that involves construction of a 1,400 sf addition in Central Austin. Nothing fancy, no special requirements. I am wondering if anyone has a sense for what percentage markup a GC would charge for a project such as this. 15%? 20%? I have worked with a GC before but that billing process was a bit opaque (big surprise). Trying to avoid that this time...

Jeremy VanDelinder · Answer

As stated above, most contractors won’t do a cost plus structure, but it is fair to say that you will be paying 20% or more beyond what it would cost if you GC yourself. Also, I can understand and appreciate the good intentions behind @Mitchell Zoll’s advice, however most contractors worth their salt will turn around and walk away (likely laughing) from a request like that.

Aidin Halebic · Answer

As an estimator working for a successful general contractor in the Austin area, the markup depends on too many factors and variables but the ones that carry the most weight would typically be size of project, type of project, and the relationship one has with the client/owner. We like to do GMP pricing as it benefits both parties and there is typically less bullshit than other contract types. Another thing to take into consideration is that "15%-20%" markup you mention usually includes overhead, risk, and profit. For perspective and example...Regarding size of project, I'm not going to build your 1,400 SF tenant improvement which consists of "$140k" in hard costs and charge you $168k. No I will probably charge you $190k because that is what is worth our time to allocate our resources (subs whom we've worked with for almost a decade) for such a small project. Now if your project is worth 6MM, 20% total including overhead, risk, markup is the norm here. Simple advice is as the cost of a project scales, the profit linearly decreases.The type of project has also a major influence on cost and markup. Restaurants cost more to build than healthcare. Healthcare costs more to build than government jobs per SF. The relationship with client also has a great deal of influence on overall price. If you're honest upfront and you're dealing with an honest GC, then both parties typically will meet in the middle and both will be happy. If you're shady or the GC is shady, then most likely the project will be a headache. I'll add a fourth one for fun, the experience a GC has in a specific market has a substantial impact on how they price the project. You're not going to find a GC who only builds schools to be competitive with a restaurant GC when it comes to pricing restaurant projects.Hope this helps!

Mitchell Zoll · Answer

Having worked with contractors her in town there isn’t a set % (This is called a “cost-plus” contract) not all contractors do a cost plus and many prefer a flat fee with change orders. A lot will depend on what trades they already have on their team and what they have to get from general subs and that also changes by their workload. One bit of advice- pay your own bills. Vendors, suppliers, even subs. The general contractor should get paid for their work (and in Austin they are getting paid well!) … but you should have direct visibility into the underlying costs to avoid surprises and avoid liens.

Marian Smith · Answer

Ten years ago I had a large insurance claim include a 20% fee for a GC. I would imagine with labor and material costs so high a GC would be getting a cost of living raise today with the same 20% fee. I agree with @Mitchell Zoll that you paying for materials and subs would create transparency and I don't know why a GC would have a problem with that unless you are slow to pay (or his subs get paid in cash)...but I have never worked with a GC. The plumbers and electricians I use take zelle, etc and send receipts electronically as I imagine most trades do...unless they are the cash operating type.

Chris Schorre · Answer

Jeremy thanks for the insights.

Mitchell Zoll · Answer

My pitch to the builder is that they shouldn’t have to be a bank (floating advances or waiting for their subs to get paid). My pitch to owners is that it avoids surprise liens, unpaid vendors, and gives visibility into costs and details. It’s a win-win, and I’ve had really good parties on both sides of the deal agree to those terms- but maybe it’s just me. I agree with you that contractors in this market can chose the deals they want to take.

Jordan Moorhead · Answer

@chris @Chris Schorreundefinedmost people I'm talking to are talking $250-300 a sq ft