Developers understand the many reasons construction projects get delayed. Financial challenges can bring a project to a standstill in the face of interest rate increases and material and equipment price volatility. There is also the ongoing challenge of finding sufficient manpower to get the job done and the weather is a factor here in the Midwest.
In the current economic environment, you may consider delaying your construction project. But before you make that decision, consider the compelling reasons to forge ahead. Being a developer is always risky and challenging. With the volatility affecting the industry today, it is important for developers to thoughtfully proceed, as opposed to delaying projects. Some perceived challenges can actually present opportunities.
Longer lead times can provide greater flexibility, which enables you to source building materials at the best possible cost. Lead times for many construction materials remain longer than normal, so think months versus weeks. Lead times... Read More >
It has been 60 days since Hurricane Ian hit Southwest Florida and left its path of destruction across the state. Ongoing surveys estimate that 20,000 homes in Lee County (Fort Myers) have been destroyed with another 2,500 in Collier County (Naples). The City of Fort Myers alone estimates their storm damage to be $600M! Lee County has reported they have reached the milestone of 1 million cubic yards of debris removed and estimates another 3 million cubic yards of debris remains. The magnitude of these numbers is staggering and doesn’t include any after-effects from elsewhere in the state.
The observed short-term impacts on the Florida construction market have ranged from labor and materials becoming more readily available as those resources have been diverted from stalled or destroyed construction projects to the exact opposite, a disruption in labor and materials originating from Southwest Florida.
The question most directed to us is what will be the hurricane's... Read More >
I am hearing different stories from clients in my discussions. There is no doubt that occupancies in Senior Living are down. There is no doubt that projects are requiring more equity, and equity demands a higher return. There is no doubt that staffing is more difficult to find and more expensive. There is also no doubt that construction prices have risen dramatically in the past six to eight months due to supply issues caused by a myriad of factors.
A client said to Bob Ritter, our Director of Business Development, the other day that he couldn’t look at new construction projects because construction costs were too high. I wonder if that is accurate. My experience in owning Senior Living projects is that capital costs are a minor part of the total operating budget. Operating costs are the vast majority. So if construction costs go up 10%, as an example, it... Read More >
It is the question everyone is asking in the construction industry right now, “What’s happening with prices, and when will it come back down?” The short answer is, no one can say for certain.
What we do know are a few key principles that can help all of us be more discerning consumers of current information:
- Commodity Prices do not Equal Actual Costs - Many people have taken to following publicly-traded commodity indexes to understand where things are going. While this can give us some insight; many things affect the commodity indexes besides just the actual cost of the materials. For material markets that have been hit extremely hard, turning to trusted suppliers is the only way to know where prices are and what is to come.
- Supply Trumps Demand - In certain markets, such as lumber and PVC, an extreme shortage in supply is driving the price and... Read More >