The Silver Lining

Like everyone, I have been looking for some good economic news mixed in among all the bad news we have been hearing. It’s taken a while, but I think I may have found something and I hope it gives our clients some renewed hope for better days. Ironically, those “better days” might be with us right now!

Construction costs have come down during the past six months. Actually, they have come way down, and I believe that clients should take advantage of this favorable bid market while it is here, if they are in a position to do so. Unfortunately, many clients have put their projects on hold due to the uncertain economic climate, and are waiting until the economy improves before reactivating design and committing to construction. That is understandable, certainly, but is not necessarily the most prudent course for every client to follow. Simply put, there are bargains in the construction industry today that may not be there a year or two from now.

Our firm designs hundreds of projects each year, in five different practice areas ranging from commercial to healthcare. During the past six months we have watched the competitive bid market retrench sharply in terms of both labor and materials on the order of 10% to as much as 15% in some cases, in every practice area, and in nearly every region we serve. More general contractors are showing interest in lump sum bidding than ever before, and for those projects that are delivered through the construction management process sub bid coverage has been extraordinary, with tight numbers in every trade. Material costs have also dropped, resulting in dramatic savings. For example, steel bids that were $4000/ton a year ago are now often below $3000/ton. Concrete, drywall, copper and other material costs have also declined.

Now, I realize that clients look at more than just the cost of construction when they consider a building program. But, I’d suggest that you at least ask your preferred contractor to give you a brief presentation on construction cost trends in your area. You may be pleasantly surprised to find a silver lining in the otherwise dark economic clouds hanging overhead.