What a construction cost benchmark includes: checking the cost scope

The governing standard is DIN 276 in its December 2018 edition. It divides the cost of a construction project into eight first-level Kostengruppen, cost groups, each of which is subdivided across three levels.

The 2018 edition brought three changes that bear directly on how benchmarks are read. Cost groups 300 and 400 may expressly be combined as Bauwerkskosten, building cost. Cost group 500 now covers both external works belonging to a building and independent open spaces. And financing costs were separated out of cost group 700 into a new cost group 800.

That last point is a widespread source of error: anyone calculating ancillary costs on the old system, and expecting out of habit that financing sits inside them, will drop that item without noticing. The percentages of the two editions are not interchangeable.

The large majority of published professional benchmarks refer to Bauwerkskosten, that is cost groups 300 and 400 combined. The figure is then normally labelled "€/m² BGF, KG 300+400".

Several items therefore sit outside that figure. They arise nonetheless.

• the site and its acquisition costs (KG 100)
• demolition, contamination clearance, site preparation and servicing (KG 200)
• external works, access roads, parking, planting (KG 500)
• loose furnishings and artworks (KG 600)
• design fees, surveys, permit charges, insurance (KG 700)
• interest, guarantees, financing charges (KG 800)

The gap between building cost and total cost is substantial. In German public sector building, cost groups 200, 500, 600 and 700 together are applied as an uplift in the order of one third on top of building cost. On private projects the order of magnitude runs lower or higher depending on the site situation, the extent of external works and the depth of design, but the uplift is never negligible.

In practice this means a building cost benchmark of 2,400 euros per square metre of gross floor area corresponds to total construction costs excluding the site well above 3,000 euros per square metre. Quoting the building cost benchmark to a client as the budget is not quoting the budget.

The two cost groups making up the usual benchmark are themselves subdivided. The second level shows what is actually being discussed when building cost is mentioned.

The share of cost group 400 within building cost has risen steadily over recent decades and regularly exceeds 30 per cent in technically demanding non-residential buildings, while sitting well below that in simple residential work. A benchmark drawn from a sample with a high services content is therefore not transferable to a simple scheme, even where both carry the same building type label. Datasets identify the cost group 400 share separately for exactly this reason.

The route from one figure to the other follows a fixed pattern. Taking a scheme of 1,500 square metres of gross floor area with a building cost benchmark of 2,400 euros per square metre: Each step must be documented separately.

The lines are deliberately left open here because the uplifts cannot be generalised: a scheme on a greenfield site with extensive servicing and an infill scheme with minimal external works sit far apart in construction sum at identical building cost. Anyone applying a flat percentage in an early phase should carry the percentage and its base in the same line, so that the assumption remains checkable later.

What this schedule mainly shows is one thing. The building cost benchmark, the figure searched for and found online, covers around four fifths of the construction cost excluding the site on this scheme, and a considerably smaller share of the total investment.

German construction cost figures circulate in both forms, and they do so across every kind of source. The common assumption that professional sources are always net and consumer sources always gross does not hold.

Unit prices and tender sums in the commercial sphere are normally quoted net. This is consistent, because a client able to reclaim input tax does not bear the tax as a cost component.

The large statistical datasets and the construction price index, by contrast, work in gross figures. Published cost benchmarks for building cost are expressly stated inclusive of value added tax, with the price date given by quarter. The Federal Statistical Office likewise notes that its price information relates to construction work on the building inclusive of value added tax.

The real check rule follows from this: the tax basis must be established separately for every source and never inferred from its character. A professional benchmark can be gross and a tender net, and both carry the same unit.

At a standard rate of 19 per cent, the confusion accounts for almost a fifth of the amount. That is larger than most regional differences and larger than the usual accuracy band of a cost estimate.

Recommendation for your own cost estimate: work in net figures throughout, show VAT as a separate line at the end, and record in every table which basis applies. For private residential clients, who cannot reclaim input tax, the gross amount is the figure that matters to them, but it should be derived from the net amount rather than mixed with it.

Worth noting is that the standard production costs used in German property valuation deliver benchmarks per square metre of gross floor area with ancillary construction costs already included at a fixed percentage. They are therefore not comparable with pure building cost benchmarks even though both carry the same unit.

Before a third-party figure enters your own cost estimate, five points need clarifying and recording. If one of them is missing, the figure is not usable.

1. Reference area: gross floor area, usage area or habitable area
2. Cost groups: which of the eight are included
3. Tax: net or gross, and at what rate
4. Price date: quarter and year of the underlying accounts
5. Sample: how many objects of what type and standard the figure was built from

If one of these is missing from the source, the figure is not useless, but it may serve only as a rough orientation and not as a computational input. That distinction should remain visible in the cost estimate.

Once the cost scope is settled, the time dimension remains. A benchmark drawn from completed projects reflects a past price level and must be converted to the date of your own estimate. The calculation is set out in the article on updating costs with the construction price index,.