This article was written by our expert who is surveying the industry and constantly updating the business plan for a construction company.
Breakeven tells you exactly when a construction project stops losing money and starts covering every cost.
In October 2025, cost inflation, higher interest rates, and uneven demand make precise breakeven analysis essential for any construction company launching new work. This guide translates current, Asia-focused urban market data into a clear, step-by-step framework you can apply immediately.
If you want to dig deeper and learn more, you can download our business plan for a construction company. Also, before launching, get all the profit, revenue, and cost breakdowns you need for complete clarity with our construction company financial forecast.
Breakeven for a construction company equals fixed costs divided by contribution margin (price per sqm minus variable cost per sqm). Tight control of land, design/permit fees, materials, labor, financing, and timeline is what moves breakeven earlier and protects profit.
Use the table below to map your project’s inputs to a breakeven-ready pro forma you can share with lenders and investors.
| Key input (construction company) | Typical 2025 range | How it shifts breakeven |
|---|---|---|
| Land + legal + permits (fixed) | 10–35% of total budget | Higher fixed costs push breakeven units/sqm up; negotiate land and compress approvals to reduce the hurdle. |
| Soft costs (design, PM, overhead) | 10–15% of total budget | Early design value-engineering lowers fixed load and shortens time to breakeven. |
| Variable cost per sqm (materials + labor) | USD $1,400–$4,200+/sqm | Every $100/sqm saved reduces the breakeven area meaningfully when selling prices are capped by the market. |
| Selling price / rent per sqm | Bangkok CBD ~ THB 236,000/sqm | Higher achievable pricing widens contribution margin and lowers breakeven quickly. |
| Financing (rate, term, structure) | ~7.5%–11% interest; IO during build | Cost of capital and interest carry increase total fixed outlay; longer build increases interest accrual. |
| Timeline & delays | 12–24 months typical build | Each month of delay compounds cost escalation and interest, moving breakeven later. |
| Post-completion Opex | 5–10% of rent; ~1% asset value/yr | For hold/rent models, higher Opex means higher stabilized occupancy needed to cover costs. |
What are the total fixed costs for this construction project?
Fixed costs in a construction company include land acquisition, approvals, professional fees, corporate overhead, and pre-opening financing.
As of October 2025, these typically total 20–50% of budget in major Asian urban markets, with land/permits 10–35% and soft costs 10–15%. Reducing scope creep, negotiating land, and fast-tracking approvals are the fastest ways to cut the fixed load.
Lock design early and cap owner changes; this avoids redesign fees and keeps your critical path intact.
Track fixed cost to gross development value (GDV) weekly and require sign-off for any variance above 1%.
You’ll find detailed market insights in our construction company business plan, updated every quarter.
| Fixed cost category | Typical range (2025) | Notes for construction companies |
|---|---|---|
| Land & due diligence | 8–25% of budget | Price, title, geotech, and environmental—negotiate phased payments aligned to milestones. |
| Permits & impact fees | USD $5k–$30k+ / project | Bundle submissions; parallel path reviews to shorten the clock. |
| Design & engineering | 5–10% of budget | Value-engineer early; set deliverable gates to avoid rework. |
| Project management | 2–4% of budget | Use earned value management to keep scope, cost, and schedule aligned. |
| Corporate overhead allocation | 1–3% of budget | Allocate transparently; limit to essential central services. |
| Financing fees & interest during build | Varies with rate/term | Treat construction interest as fixed carry; model monthly with draw schedules. |
| Contingency (fixed) | 3–5% of budget | Reserve for approvals, scope, and utility surprises separate from construction contingency. |
What are the variable costs per unit (materials, labor, subs, equipment)?
Variable costs scale with each square meter built and include materials, site labor, subcontractor packages, and equipment usage.
In 2025, unit costs commonly range from USD $1,400–$4,200+ per sqm, with materials ~65–80% and labor ~20–35% of variable spend. Volatility remains elevated for steel and timber; lock prices with hedges or guaranteed maximum price (GMP) clauses where possible.
Standardize specifications and pre-buy long-lead items to reduce price risk and avoid idle crews.
Measure productivity as labor-hours per sqm, and reward crews that beat baseline with zero rework.
| Variable cost item | Share of variable | Control levers for construction companies |
|---|---|---|
| Structural materials (steel, concrete) | 25–45% | Framework packages, mill lock-ins, and schedule-driven pours to minimize waste and pump rentals. |
| Architectural finishes | 15–25% | Grade rationalization and supplier consolidation to cut unit prices and defects. |
| MEP systems | 15–25% | Design-assist and prefabrication to reduce labor hours and change orders. |
| Site labor | 20–35% | Task-based productivity tracking; align subcontractor milestones with pay-when-paid terms. |
| Equipment & rentals | 5–10% | Right-size crane time; bundle rentals; avoid idle days via look-ahead scheduling. |
| Waste, rework, shrinkage | 2–5% | QA/QC at handoff; BIM clash detection to prevent field conflicts. |
| Construction contingency | 10–15% of hard costs | Held by GC; release in tranches after critical milestones. |
What is the total construction cost from start to completion?
Total cost equals base construction plus infrastructure, soft costs, financing, and contingency until completion.
Example: 2,500 sq ft at $250/sq ft = $625,000; add infrastructure 15% ($93,750), soft/permits/finance 12% ($115,500), and 10–15% contingency ($93,375–$140,000) for a total near ~$1.05M. For a 100,000 sq ft warehouse at $20–$60/sq ft, budget $2–$6M plus sitework and fees.
Always carry at least 10–15% contingency in 2025 given supply risk and regulatory timing.
Update the cost model monthly and freeze scope before mobilization to avoid cascading overruns.
This is one of the strategies explained in our construction company business plan.
What is the expected selling price or rental rate per unit?
Use current comparables to set a realistic selling price or rent per sqm for your construction company’s project.
As of October 2025, Bangkok CBD averages ~THB 236,000/sqm, with outer areas at THB 70,000–120,000/sqm; typical new condo units sell for ~THB 1.5–6.4M. Residential rents often sit near USD $9–$28/sqm/month, while warehouses can lease around THB ~160/sqm/month.
Price to hit absorption targets while protecting contribution margin against your variable cost per sqm.
Refresh comps every 30–45 days until launch to keep your pricing aligned with live demand.
How many units or square meters must be sold or leased to break even?
Breakeven area equals total fixed costs divided by contribution margin per sqm.
Formula: Breakeven (sqm) = Fixed Costs ÷ (Price per sqm – Variable cost per sqm). Example: $5,000,000 fixed; variable $1,800/sqm; price $2,600/sqm; margin $800/sqm → breakeven = 6,250 sqm.
For a rental model, use annual net operating income instead of sale price and compare to all-in annualized carry.
Build a simple dashboard showing current margin per sqm and remaining fixed costs to visualize progress.
What financing terms apply, and how do they affect breakeven?
Financing structure (interest rate, draw schedule, interest-only period, and term) changes both cost and timing to breakeven for a construction company.
Typical construction loans carry ~7.5%–11% interest with interest-only during build (often 12–24 months), with principal repaid at sale, lease-up refi, or maturity. Higher rates and shorter IO windows accelerate the need for pre-sales or early leasing.
Model monthly interest carry from your draw schedule instead of using a flat annual rate assumption.
Ask lenders for rate caps or swap options to bound interest risk through completion.
| Financing term | Typical 2025 value | Breakeven impact for construction companies |
|---|---|---|
| Interest rate | ~7.5%–11% | Higher carry inflates fixed costs; increases required sqm sold/leased. |
| Interest-only period | 12–24 months | Shorter IO compresses sell/lease schedule and raises cash need. |
| LTV / LTC | 60–75% | Lower equity improves ROE but raises monthly interest; balance with absorption. |
| Draw schedule | Milestone-based | Front-loaded draws increase carry early; smooth with supplier terms. |
| Fees (origination, legal) | 1–3% of loan | Include in fixed costs; amortize across expected sales/leases. |
| Prepayment | Step-down | Impacts refi timing; confirm with expected lease-up date. |
| Hedging | Caps/swaps optional | Stabilizes carry; cost justified when rate volatility is high. |
What is the construction timeline, and how do delays change breakeven timing?
A realistic 12–24 month timeline is standard, but delays are common and expensive for construction companies.
Each month of delay can add ~1.5–2% to materials and ~1–1.5% to labor in hot markets, while interest continues to accrue. Delays also push revenue recognition, moving breakeven later.
Protect the schedule with long-lead procurement, enforceable subcontractor milestones, and weekly look-ahead meetings.
Capture delay root causes in a register and add escalation clauses to share risk fairly.
We cover this exact topic in the construction company business plan.
What operating expenses should we expect after completion?
Post-completion operating expenses matter if your construction company holds assets for rent or during lease-up.
Expect 5–10% of rental income for property management, insurance trending +9–18% YoY nationally, and ~1% of asset value annually for repairs. Utilities, payroll, and reserves often add 10–25% when managed by third parties.
These expenses raise the occupancy level needed to cover debt service and reach cash breakeven.
Benchmark Opex monthly and renegotiate vendor contracts annually.
| Operating expense | Typical 2025 level | Breakeven consideration |
|---|---|---|
| Property management | 5–10% of rent | Raises required stabilized occupancy for NOI breakeven. |
| Insurance | +9–18% YoY trend | Model increases at renewal; explore higher deductibles. |
| Repairs & maintenance | ~1% of asset value/yr | Include reserves; mitigate with warranties and QA. |
| Utilities & common area | Project-specific | Sub-meter where possible; pass-throughs reduce Opex burden. |
| Security & cleaning | Scope-dependent | Right-size to actual footfall; RFP biannually. |
| Leasing & marketing | Initial lease-up | Front-loaded expense to accelerate absorption curve. |
| Administrative | 1–2% of rent | Standardize back-office processes to lower overhead. |
What occupancy or sales absorption is realistic in today’s market?
Most construction companies should plan for 70–85% stabilized occupancy or sell-through within 12–24 months for new urban projects.
Actual absorption depends on unit mix, pricing vs. comps, and marketing intensity; presales and tiered pricing accelerate the curve. Track weekly leads-to-contracts and adjust incentives in two-week sprints.
Use digital campaigns and broker SPIFs to pull forward early adopters without discounting headline price.
Set go/no-go gates tied to presale percentages before major capital deployment.
- Anchor presales target: 25–35% before pouring major verticals.
- Early-bird pricing window: limited to first 10–15% of inventory.
- Absorption KPI: net contracts per week vs. traffic.
- Fall-back lever: mix shift (e.g., smaller units) if velocity stalls.
- Broker program: tiered commissions for pace, not just volume.
What external risks could shift the breakeven point?
External shocks change costs, demand, and timing—construction companies must hard-wire risk controls into contracts and schedules.
Key risks in 2025 include material and labor inflation, interest-rate volatility, regulatory shifts, and supply chain delays. Each can compress contribution margin or extend your timeline, pushing breakeven out.
Use escalation and force-majeure clauses, diversify suppliers, and maintain 10–15% contingency.
Review risk quarterly and re-price phases if market conditions change.
- Materials (steel/timber) price spikes → hedge or pre-buy.
- Labor shortages → multi-crew agreements and training pipeline.
- Rate hikes → interest caps/swaps and faster presales.
- Permitting changes → parallel submissions and specialist counsel.
- Supply chain → dual-source critical components and maintain safety stock.
What profit margin should we target beyond breakeven?
Set a clear margin target above breakeven so your construction company earns a risk-adjusted return.
Institutional targets commonly range from 20–35% gross margin above breakeven; translate this into required sqm by dividing target profit by contribution margin. Example: breakeven 6,250 sqm and a 25% margin target → sell/lease ~7,813 sqm.
Phase releases to maintain pricing power, not to “chase” volume at thin margins.
Tie PM bonuses to margin protection, not just schedule hit-rates.
It’s a key part of what we outline in the construction company business plan.
What sensitivity analysis should we run on costs, prices, and demand?
Every construction company should stress-test breakeven against the variables most likely to move.
Run scenarios with ±10–20% for materials, ±5–10% for sales/rent prices, ±10% for occupancy, and +100–200 bps for interest rates. For each case, recalc contribution margin, breakeven sqm, and timeline to cash neutrality.
Present a decision matrix to lenders showing mitigation steps if downside cases occur.
Refresh sensitivities monthly during procurement and quarterly during lease-up.
| Scenario | Shock | Breakeven response & mitigation |
|---|---|---|
| Materials inflation | +15% | Margin ↓; value-engineer specs, substitute equivalents, draw on contingency. |
| Labor escalation | +8% | Margin ↓; prefabricate, resequence trades, productivity bonuses. |
| Price softening | −7% | Margin ↓; add incentives (non-price), release smaller units first. |
| Absorption slowdown | −10% velocity | Cash curve shifts; extend IO, intensify broker program, flex mix. |
| Rate increase | +200 bps | Carry ↑; execute caps, accelerate presales, trim non-critical scope. |
| Permit delay | +3 months | Cost ↑; parallel path packages, maintain holding cost reserve. |
| Supply chain slip | Long-lead +6 weeks | Schedule risk; pre-buy, dual-source, resequence to interior work. |
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.
Want to master construction company economics?
Explore practical guides that go deeper into pricing, costs, demand, and profitability.
Sources
- Turner & Townsend — Global Construction Cost Trends 2025
- Gordian — 2025 Construction Cost Update
- Baldwin CPAs — Construction Cost Outlook 2025
- Red Stag — Cost to Build a Warehouse
- The Cover Plus — Thai Real Estate Market H1 2025
- RE/MAX Thailand — Market Report 2025 H1
- Frasers Property — Renting Factories & Warehouses
- Dojo Business — Construction Company Breakeven Point
- United Capital Source — Construction Loan Interest Rates
- WSHB — Building Toward 2025: Risk & Delay
- Construction Industry Profit Margin
- Construction Company Business Plan: How to Build Yours
- How Much Does It Cost to Start a Construction Business?
- Construction Company Startup Costs (Full List)
- Construction Company Competition Study
- Construction Company Customer Segments
- Construction Company Profitability
- Startup Costs: Tools & Vehicles for Construction Companies
- Tool-Driven Revenue in Construction Companies
- Construction Company: The Complete Guide
