CONSTRUCTION ECONOMICS

3. Building Size

 In general, an increase in the size of a building will
decrease its unit cost.

 Cost does not rise in proportion with increase in size.
 The greater the floor area of a building the lower the

cost per square metre.

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The following example shows three square shaped building of
different size. The wall height is 4m

BUILDING SIZE GFA WALL WALL RATIO
(M) PERIMETER AREA WALL
100 (M2) AREA/GFA
A 10 X 10 400 (M)
B 20 x 20 1600 160 1.6
C 40 x 40 40
320 0.8
80
640 0.4
160

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Building A BUILDING B
100 M 50 M 50 M

50 M 50 M

Storey height, 4m Storey height, 4m

GFA (M2) 5000 2500 X 2

WALL AREA 1200 800 X 2
(M2)

RATIO 0.24 0.32

WALL AREA

/ GFA

As building B has two units, the ratio of wall to GFA is 0.32, one time more

than Building A.

• The cost of services installation such as lifts, escalators, air-conditioning and

installation of electrical equipment will not increase proportionately with the

size of the building. Cost of installation, operation and maintenance service

for the two units of Building B is higher.

• A large building will have a higher maintenance cost. This is because

additional size means more elements and spaces need to be maintained.

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4. Building Storey Height

 Variations in storey height will cause changes in building
cost.

 Increase in building height influence building cost for
building with the same gross floor area.

 The difference in construction and maintenance cost is
more obvious and is especially influenced by vertical
building components. Among the major costs that will
changed when the storey height increase are :

 Construction cost for the foundation and structural frames
will increase due to the increase in load on the foundation.
The foundation will be bigger and might require a safer
system such as the use of piling.

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 Construction cost of stairs, escalators and lifts.
 Wall works – increase in qty of external and internal

walls, wall finishes.
 Ceiling construction
 Installation of air-conditioning system
 Installation cost of electrical wiring and piping for

water supply will increase
 Increase in storey will affect the building maintenance

cost such as repainting works, cleaning of walls,
operation cost of air-conditioning, etc

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5. Building total height

 The construction cost will increase with the increase
in the total height of building or with the increase of
storey height.

 The construction cost for a high structure is more
than low building that provides and offers the same
GFA.

 However, a high rise building is necessary to be built if
the land area is limited and expensive.

 There are several factor to be considered when
designing high rise building. There are :-

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6. Changes in the number of storey

 If the two building with the Hoisting System Wind Load
same GFA are different in the
number of storey, generally
the construction cost for the
higher building is more
expensive.

Service System Vertical
Wall System transport

Structure System (frame, floor, Foundation System
staircase

SUMMARY OF EFFECTS OF ADDITION OF
HEIGHT TO BUILDING COST

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10m BUILDING A BUILDING B
10m
No of storey 5m
Storey Height 3m 5m
GFA (M2)
2 3m
Perimeter ext 3
wall (grd lvl (10 x 10)2 = 200 8
only) 10 x 4 = 40 3
Ext wall area (5 x 5)8 = 200
(m2) 5 x 4 =20
Perimeter ratio
Ratio ext wall 40 x 3 x 2 = 240 20 x 3 x 8 = 480
area
40 : 20 / 2 : 1
240 : 480 / 1 : 2

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7. Circulation Area

 It is obvious that circulation area is one of main
factors that influence design.

 It is obvious for commercial buildings built for the
purpose of rental.

 The rent obtained greatly depends on the net or
usable area.

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SINGLE STOREY BUILDING DOUBLE STOREY BUILDING

5m 5m
2m Corridor
5m 2m Corridor
Stai
9m
5m rwe
ll

9m

Usable area, m2 (5 x 9) 2 = 90 [ (5 x 9) + (5 x 6) ] 2 storey =
150
Circulation area, 2 x 9 = 18
m2 [ (2 x 9) + (5 x 3) ] 2 storey = 66
GFA, m2 9 x 12 = 108
% of circulation 18 / 108 = 17% [ 9 x 12 ] 2 storey = 216
area 66 / 216 = 31%
83%
% usable rent out area 69%

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SITE FACTOR

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Affect of site on building size

 The limited size of the land will limit the size of the
building to be built.

 Sites in the “Golden Triangle” in KL for eg are large in
size and so the buildings built are large and
horizontally built in comparison to other area which
have fragmented sites

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 Necessary to build a high rise building in order to get a
bigger GFA, aesthetic and prestige purpose, or to get the
maximum floor use for expensive land

 Cost changes according to type, shape and construction of
bldg. For eg, where the increase in the number of storey
does not affect the structure, the unit cost of the building
will decrease.

 The foundation cost/GFA will decrease with an increase in
height of storey if the foundation construction shape does
not change. But if piling or special foundation is needed,
then the foundation cost will increase.

 The cost of lift, escalator and stair will also increase when
the height increase.

 Maintenance cost increase.
 Increase in wiring.

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Affect of site on design of building

 The site affect the design of a building.
 For eg, the Bank Rakyat building has

an irregular diamond shape design in
order to maximize the site, which is
almost triangular.
 The lines on the Wisma Shaw building
follow the shape of the site that is
polygon.
 In general, it can be said that many
buildings have a conventional
rectangular shape when the
characteristics of the site do not limit
the shape of the design.

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Affect of site on plot ratio

 The plot ration is the ratio of the site area with the
total construction area.

 When the size of the site is limited, there is a
tendency to have more floors by construction the
building upwards or by construction more floors
below ground level.

 It is hope that this will balanced the high cost of the
land

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Affect of site condition on design

 Land that has a safe load bearing capacity 600kN/m2
may be supported by the pad foundation.

 Some sites have a high water table and this cause
problems in construction and design.

 A special foundation and design is needed.
 The contour of the land has an effect in terms of the

foundation design especially for sites with steep
slopes.
 The cut and fill works might be increased.

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Affect of site location on design

 If the site situated
at a location with
many high rise
building, there is a
tendency to
compete with the
existing building.

 This competitive
nature to attract
attention may cause
the practical and
economical aspect
of the building to be
ignored.

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This house on a wedge of land in Shiga, Japan,
is by FORM/Kouichi Kimura Architects.

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QUIZ

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QUIZ

Question 1

Explain ‘Housing Development’. (5 marks)

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Question 2

Describe FIVE (5) importance of cash flow. (10 marks)

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ANSWER SCHEME QUIZ 1:

Question 1 (5 marks)
Explain ‘Housing Development’.

*any points related to Housing Development (definition, importance, Feasibility Study, stages,
etc)*

Question 2 (5 marks)
Describe FIVE (5) importance of cash flow.

1) Income assurance – An organization tends to have an assured income irrespective of the
outside economic condition

2) Ensures timely payment – An uniform and assured cash flow, in both the directions,
ensures two principal payments, namely, the salaries of employees are paid on time and
instalments of all loans are made on time

3) Keeps out of debt - timely cash inflow plays a very instrumental role in keeping you out of
debt, as a timely inflow of cash prevents you from taking small loans

4) Saves unnecessary expenditure - Use of inward and outward cash flow, prevents all
unnecessary expenditure such as piled up interest, late payment charges, etc

5) Investment basis - as a basis for investors to evaluate financial performance in terms of
developers in implementing a project

6) Understand fund movement - shows how the company has acquired the source of funds
to buy assets - new assets, pay dividends and repay debts.

7) Reflections the projects strength and profitability - If cash flow is actually not adjusted as
planned, it will have adverse effects on the overall project plan.

8) Know when project will produce income - be able to know at a certain time the projects
are facing a cash surplus or deficit and how much.
*(any 5 points)

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QUIZ 2

Question 1

List 2 types of cash flow with the example of activities. (5 marks)

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Question 2

Interpret the influences that will affect cost differently. (5 marks)

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Question 3

Explain on building total height influenced the cost of building. (5 marks)

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Question 4

Explain on Design of building that will affect the site. (5 marks)

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ANSWER SCHEME QUIZ 2:

Question 1 (5 marks)
Explain 2 types of cash flow with the example of activities.

i. OPERATING ACTIVITIES – includes cash flows from the principal revenue generation
activities such as sale & purchase of goods and services.

ii. INVESTING ACTIVITIES – cash in-flows and out-flows related to activities that are
intended to generate income and cash flows in future. This includes cash in-flows and
out-flows from sale and purchase of long term assets.

iii. FINANCING ACTIVITIES – cash flows related to transactions with stockholders and
creditors such as issuance of share capital, purchase of treasury stock, dividend
payments, etc.

Question 2

Interpret the influences that will affect cost differently. (5 marks)
- Client’s needs
- Building and planning requirements including site conditions
- Construction technique
- Condition and location site
- Market condition, etc

Question 3

Explain on building total height influenced the cost of building. (5 marks)

• Construction cost will increase with the increase in the total height of building or with the

increase of storey height.

• Construction cost for a high structure is more than low building that provides and offers

the same GFA.

• However, a high rise building is necessary to be built if the land area is limited and

expensive.

• Several factor to be considered when designing high rise building, such as:

• Necessary to build a high rise building in order to get a bigger GFA, aesthetic and

prestige purpose, or to get the maximum floor use for expensive land

• Cost changes according to type, shape and construction of building.

• Eg, where the increase in the number of storey does not affect the structure, the

unit cost of the building will decrease.

• The foundation cost/GFA will decrease with an increase in height of storey if the

foundation construction shape does not change. But if piling or special foundation

is needed, then the foundation cost will increase.

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• The cost of lift, escalator and stair will also increase when the height increase.

• Maintenance cost increase.

• Increase in wiring. *(either 2 factors)

Question 4

Explain on Design of building that will affect the site. (5 marks)

The site affect the design of a building.

• For eg, the Bank Rakyat building has an irregular diamond shape design in order

to maximize the site, which is almost triangular.

• The lines on the Wisma Shaw building follow the shape of the site that is polygon.

• In general, it can be said that many buildings have a conventional rectangular

shape when the characteristics of the site do not limit the shape of the design.

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REFERENCE

Ahmad. K, (2005), Ekonomi Binaan, Prentice Hall.
Seeley, I. H. (2005), Building Economics (4th Edition), Macmillan Education.
Ruddock L. (2009), Economics for the Modern Built Environment, Taylor & Francis.
Valance D. G. (2011), Modern Construction Economics: Theory and Application,
Spon Press.
S. W. Nunnally (2007), Construction Method and Management, Pearson Prentice
Hall.

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