Avista Corp. has nixed plans for a new office building near its 1411 E. Mission Ave. headquarters, citing high construction costs.

The utility had planned to start construction later this year on a 36,000-square-foot building on 3.2 acres the company owns on Upriver Drive.

The new building would have eased crowding at Avista’s headquarters, where 650 people work.

“As we moved through the process of designing it, we started crunching numbers and it became obvious to us that it didn’t make good business sense,” said Laurine Jue, an Avista spokeswoman.

Jue declined to disclose cost estimates, but said higher-than-expected prices for materials and labor influenced the decision not to build.

Instead, the company will look for cheaper space to rent or buy.

In addition to giving Avista employees more elbow room, the additional space will provide the company with flexibility during a major remodel of its headquarters building early next year.

Jue said the 50-year-old building was a model for energy efficiency when it was built, but has fallen behind.

Through the remodel, Avista plans to bring the building into compliance with the U.S. Green Building Council’s standards, Jue said.