Two weeks ago, I attended the National Investment Center for Seniors Housing & Care (NIC) in Washington, D.C. As always, it was good to see old friends and clients, and interesting to get a read on the industry. There were really no surprises, but it’s good to get intensive confirmation of what’s going on.
Senior living development is really a somewhat bifurcated proposition at this point. Though we are still building and have recently started a number of assisted living/memory care (AL/MC) projects, most of the developers are not bullish on this sector right now. Operating costs are up dramatically, interest rates and construction costs continue to rise, occupancies have not fully recovered, and rents have not yet risen to cover the increased expenses. There are some AL/MC developers that think that they just need to forge through, that it’s just a bump in the road and all will be good,... Read More >
Behind the critical milestones of building dry-in and completion of drywall hanging, the date of permanent power provides a key indicator of a project’s schedule trajectory towards completion. Unfortunately, the current construction industry is being severely impacted by major challenges within the electrical gear industry driven by demand, labor issues, and electrical component shortages. Critical switchgear components such as switchboards, distribution panels, and heavy-duty circuit breakers have historically taken four to six months to receive. Over the past year, lead times on these items have increased to a minimum of 12 months, and quoted lead times of 14-18 months are becoming the standard.
So how does this impact the construction industry? For comparison, a $25 million senior living project with a construction schedule of 18 months, would typically require permanent power to be in operation by the twelfth month of construction to allow the startup-up of essential HVAC equipment, building systems,... Read More >
Inflation, fuel prices, material escalation, and material shortages are pushing construction prices to record highs. Already tight project budgets are being value engineered, tabled in hopes that pricing will come back to earth in the future, or just abandoned. Like everything else these days, the typical value engineering process is not as effective as it once was. When project pricing comes in over budget, we have historically provided a list of suggested alternate materials, methods, and/or systems to help bring the cost back closer to budget if needed.
Currently, inflation is working against project teams trying to value engineer projects. On several recent projects, material escalation has negated any value engineering efforts. Meaning…during the time it takes to price VE alternates, and get the accepted changes into the design documents, the pricing of the other trades and materials has increased an equal or larger amount of the costs saved from the approved value... Read More >
“No one can whistle a symphony. It takes an orchestra to play it.” Famous quote by H.E. Luccock.
Closing a job and seeing it to the finish is not easy. Most in our industry would tell you it can be the least favorite part of the project. Most would also tell you it is impossible to live in fantasy land after working through the challenges of the last two years. There’s no magical bench of labor we can pull from and have crews arrive onsite the next day when needed. There’s no la-la land where the material is in stock and can be pulled off the shelf for overnight delivery. At The Douglas Company (TDC), our core purpose is to contribute to the success of our clients and associates. The industry has changed which has required us to adapt and change with it.
The All American Assisted Living at Enfield... Read More >
Wood structures seem to have gotten a bad rap the last few years. It’s not entirely their fault. The skyrocketing land costs have pushed projects to go to more stories than a conventional wood frame building allows to get the number of units needed. Massive price hikes and volatility of material costs have also made it a less desirable building material to use.
Throughout the years The Douglas Company has proudly worked hard to build as much of our work out of wood as possible. We thought we should revisit the good reasons and tactics for doing so that still exist today.
Wood framing is simply faster than other methods. Modular and panelized systems abound in our industry now, but none of them from our experience go up faster than a wood-framed structure. Despite some of the scary lead times we’ve seen over the last two years, wood framing materials involve many... Read More >
It is easy to focus on the building cost per square foot in the preconstruction process, but the site costs can make or break a project. Too often we see scope creep on the project site after the initial site plan, and it takes asking the right questions and getting creative to bring these costs back in line.
As your civil plans develop and soils reports become available, make sure you’re asking the design team these questions:
- Grading - Are the buildings at the right elevation? The finished floor level is usually set early in the design process, but as more requirements become known it may not be the right height anymore. Raising/lowering a finished floor level can help reduce soil import/export, and can have positive impacts on your storm sewer layout as well.
- Deep Foundations/Undercuts - It seems that poor soils are an issue on most projects we are looking at... Read More >
As the world continues to evolve with technology, so too does the construction industry, albeit at a much slower rate. Looking back over the last 15 years, it is incredible to think about how much technology has changed in our daily lives. Smartphones weren’t very prevalent and the first generation of the iPhone had just been released. Businesses used fax machines instead of email to transmit information, very few people knew what the cloud was, and drones, as we know them today, didn’t exist.
As it relates to the construction industry, 15 years ago I can remember physically mailing sets of drawings out to people for them to bid jobs and waiting for their faxed bid to come through. People used an actual camera to take pictures, and submittals were wet stamped and mailed to the design team for their review.
All of the efficiencies gained through technology really are fascinating. To... Read More >
In today's construction world, more and more time and resources are spent on scheduling, and with good reason, too. With the high cost of construction loans and general conditions, contractors and developers alike can agree that the sooner we hand over a building the better for all those involved. Project milestones, proper sequencing, and task and crew logic are all scheduling terms that are thrown around on a weekly basis when discussing how we get the job done as soon as possible.
But what if I told you there was something else besides scheduling that can hold up progress on your project just as much as a missing drywall crew or bad schedule logic? Wouldn’t that be something we need to be cognizant of?
I am talking about inspections, of course. Inspections are a necessary step in the construction process to provide a third-party audit that the work meets all code requirements... Read More >
Some developers and investors are unsure about committing to new senior living developments amid rising construction costs and interest rates, while others remain bullish on building new communities figuring that demand will be outpacing supply for the foreseeable future. I have even heard from some clients that they really push to get new developments going in this environment when other potential new projects may be holding off which gives them a leg up in a given market.
One segment that continues to gain steam is active adult according to a recent article in Seniors Housing Business’ April Edition. Active adult communities target those 55 years old and older that are ready to rid themselves of all things associated with home ownership, but are young and healthy enough that they don’t require assistance with daily living activities. These communities are not as labor- or service-based as an assisted living community because they... Read More >
As we move into the rainy season, it’s important to revisit best practices of protecting wood from the elements during construction. Previously, we used to rely on just-in-time deliveries which would limit the amount of time our framing materials were subject to the weather prior to being covered up. With today’s market environment, we find ourselves ordering materials early and storing them on site so that we can be productive as we start building and not run out of material along the way. This has led to lumber being stored for longer periods than we are used to. It’s important that this is taken into consideration as we construct our projects and that we don’t allow deterioration of our building products to occur.
First, develop a plan early to deal with these issues in order to reduce the risk of mold and product deterioration. Ensure that your storage area is well... Read More >
I thought I’d write a blog about some good news, at least for multi-family developers. No, costs aren’t coming down, nor are interest rates. But rents for multifamily are going up! According to rent.com through April 2022 apartment rents nationwide for two bedroom apartments are up 22.8% in a twelve month period. In some areas that are close to us they are up even more. Orlando rents are up 38.2%. Cincinnati is 37.8%.
So while costs are up and interest rates are threatening to rise, rents in many areas more than make up for this, creating opportunity. Rent.com goes on to say that the shortage of supply coupled with increasing demand and increasing inability of people to purchase homes is causing this phenomenon.
Good news for multifamily developers.
... Read More >
Everywhere I go people are asking what’s going to happen with construction prices, and they are right to ask. I visited with a prospective client this month and he told me that construction prices on his prototype increased 46% in two years, which was shocking to him and a little surprising to me. We are tracking prices in our Florida office and our records indicate costs are up 30% in 14 months, 2% per month, so I guess I shouldn’t have been surprised. Everywhere we look subcontractors are backing out of quotes and/or raising prices, and even once under contract don’t always honor prices. Materials and labor availability is a whole other issue. It’s hard to believe these increases can continue, but I don’t see any signs of relief.
The above doesn’t make our jobs any easier or more enjoyable. We hate giving bad news to our clients on costs, but... Read More >
The multi-family market has certainly evolved over the last several years. From the types of amenities renters demand, to an influx of new single family build to rent communities. Not to mention the changing renter demographic. While millennials make up one of the largest rental cohorts, the age 55+ Baby Boomers are selling their homes and opting for a more convenient lifestyle.
According to Forbes, in the last decade, the multifamily market has experienced hyper growth. Even during the pandemic, 2020 saw a 50% increase in multifamily units, compared to that of 2019. Rents in multifamily housing markets have continued to climb. Yardi Matrix reported in February that year over year rent growth increased 15.4% and occupancy rates of 96.9%, surpassing the previous record of 96.5% in 2000.
Today’s renters are demanding more and different amenities. This includes everything from storage areas or lockers for packages, trash valet services, community dog parks... Read More >
In the spirit of being a consultant I wanted to discuss a topic that we have seen create frustration and cost money for some developers. Bidding Budgets; or “bidgeting” as we have heard it called. It is when early drawings are put out to multiple General Contractors for the purpose of obtaining their budget estimate which will be utilized to select the contractor for the job. In the beginning, the intent may have been to go with the best OVERALL choice, but in the end, the contractor with the lowest budget estimate is selected to work with going forward. This is not working on a negotiated basis, this is bidding budgets.
There are inherent risks to this process and at the end of the day, it doesn’t necessarily provide you with the best price solution (one of our brand promises by the way) that you were looking to move forward within... Read More >
But what does that mean? It means quite simply that we exclusively work with developers. We do not bid government projects or work with large corporations, retailers, etc. We work with developers to assist them in making their vision become a reality.
Being a developer’s contractor means we have the experience, knowledge, and personnel to get involved early in projects and work on a collaborative basis with the design team and owners. Not everyone plays well with others but when you do it on a regular basis in the conceptual stages like we do, you get good at it and see the positive results it brings to a project and all involved.
If you want a general contractor to sit on the sidelines while drawings are completed and then bid on that final set of drawings you are missing out on a very beneficial strategy to save time (which is, of course,... Read More >
As one of The Douglas Company’s core values, “Peace of Mind” is something that we take very seriously. One of the key components to delivering “Peace of Mind” is timely and effective communication to ensure that clients are not surprised by unexpected events, delays or issues during their project.
While we cannot prevent unexpected events, clients hire The Douglas Company for our ability to foresee potential challenges to their project, keep them informed, and offer a solution to deal with situations before they become a surprise. Many times these are not easy conversations to have with clients, but they are crucial.
Part of The Douglas Company’s on-going training and development program, all of our Project Managers, Assistant Project Managers, Superintendents, Estimating Staff, Business Development and Senior Management will be participating in a 3-hour seminar focused on “Building Better Customer Communication”. Individually and collectively, all of us are committed to enhancing our communication... Read More >
The project schedule is a given for any construction project. For the project team, particularly the Project Manager, it is the most important tool in setting priorities for the team. For all other stakeholders in the project, it can be an incredibly useful tool as well. In order to take advantage of this however, there are a few important concepts to understand and to ask your contractor about regularly:
- Progressive Elaboration - This is a concept that many schedules take advantage of, it involves bringing additional detail into the project schedule as it becomes available; typically as the team comes closer to performing the work. For instance, it is not reasonable to expect a project team to have a detailed breakdown and sequence assigned to the finishes portion of the schedule at ground break, but that portion of the schedule should look much different when you're wrapping up drywall work.
... Read More >