Managing Construction Costs for Banks and Credit Unions

Aligning budgetary expectations in an inflationary environment

Bank branch construction example

Construction Costs at a Glance: 

  • U.S. banks are building more branches for the first time in a decade 
  • Materials and labor cost increases mean that a project completed in 2021 would cost about 15% more to complete today 
  • When using only an architecture agency, clients may get a design they want, but without the budgetary figures they need 
  • Turnkey delivery ensures clients stay informed with construction experts who manage budgets and schedules that aren’t static 

Concluding a 10-year trend of net closures of locations, bank branches found themselves on the comeback trail at the end of 2023. “[The year] ended a decade-long consolidation of physical locations triggered by the aftermath of the 2008 financial crisis, which forced many banks to reduce their footprints while relying more heavily on digital banking,” finds Yahoo! Finance. But data shows that customers want more than mobile; they want branches nearby. According to Believe in Banking, “Branches are so essential for experiences that for the first time in a decade, U.S. banks added more net new branches in 2023 with no signs of slowing down.”  

Construction Costs

As banks rediscover the power of their retail network, construction costs continue to rise. Even as pandemic supply chain issues resolve, overall construction costs increased 4% in 2023. “Managing cost escalation in the U.S. construction sector presents an ongoing challenge, albeit a familiar one,” says Rachel Personius, associate director of Currie & Brown, which released 2024 construction industry data in Globe Street, a commercial real estate trade publication. “It’s time for our industry to shift from firefighting to proactive collaboration with clients in navigating this persistent trend.”  

Adrenaline’s own design and construction projects bear out these realities for our clients embarking on ground-up and fit-out construction, alike. For example, a proposal for branch construction in August 2023 totaling $4.6 million is $4.9 million in 2024, when updated with current labor and material costs. That kind of increase is due to higher price for key materials, like concrete, which has gone up 45% in a year. Overall industry increases mean that a project completed in November 2021 that was $700 per square foot would be about 15% more today. But there are ways to keep construction costs and timelines on track with expert consultation and organization.

Coordinating Construction 

Given that most banks and credit unions build a de novo branch every 1-3 years, there can be sticker shock when a project proposal from just a year ago comes in higher than expected due to materials and labor costs. In fact, one of the biggest challenges in building and construction right now is aligning budgetary expectations with the realities of current costs. Helping clients understand upfront the implications of increased costs helps avoid derailing a project midstream. Having both a wide and deep knowledge of the supply landscape and providing ongoing, real-time cost monitoring are essential to helping clients make smart choices.  

The design and construction process begins by providing clients a rough order of magnitude very early in the project, sometimes even before putting pen to paper on design, and continually measuring back to the budget. Having one end-to-end partner – rather than a separate architecture firm and general contractor – helps keep clients informed every step of the way and in a position to make the best decisions for their budget. When using only an architect of record, clients may get a design they want, but without the budgetary figures they need, which won’t come until the project goes out to contractor bid.   

Upfront & Ongoing Guidance 

The vital role of guidance and due diligence during the construction process cannot be overstated. As an end-to-end provider, Adrenaline not only delivers design based on banking industry best practices, but also construction management services which entail getting multiple general contractors to the table to competitively bid on the project. The goal here is to ensure that the client is getting the right value. However, that value is not just based on price alone, because a low bid is not necessarily the right bid. What we’re looking for is the most qualified contractor and best value per the scope of work.  

With turnkey delivery, clients stay informed with construction experts who manage budgets and schedules that aren’t static – they’re a realistic and living documentation that evolves as a project progresses. Adrenaline’s commitment to accuracy is rooted in due diligence and experience,  far surpassing the construction services industry at large with their track record of significant delays and cost overruns. What clients are looking for in branch building is a location that looks exactly how they expect given the design and a project that takes the amount of time and money they planned. 

To learn more about design and construction for building innovative physical environments as the perfect homebase for brands, or to speak with one of Adrenaline’s experts, contact us today.

Adrenaline is an end-to-end brand experience company serving the financial industry. We move brands and businesses ahead by delivering on every aspect of their experience across digital and physical channels, from strategy through implementation. Our multi-disciplinary team works with leadership to advise on purpose, position, culture, and retail growth strategies. We create brands people love and engage audiences from employees to customers with story-led design and insights-driven marketing; and we design and build transformative brand experiences across branch networks, leading the construction and implementation of physical spaces that drive business advantage and make the brand experience real.

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