M.A. Mortenson (a very large construction company) says construction prices increased 19.2% last year. ROMAC (a very large building product supplier in Florida) says that on average, materials for a house from mid-December to mid-January went up 12%. Already subcontractors are telling us that they are booked for the year. Truss suppliers, who traditionally have had 2 to 4 weeks fab and deliver times, are out to October, making projects challenging to start and maintain continuous construction. The price of Ready-mix is up by $10 - $20 a cubic yard in the last couple of months, and drywall has been going up approximately 10% a month.
I am tired of delivering bad news. Everyone knows prices are going up, but it is shocking the extent they are going up. Our clients seem to be getting numb to increases, and they are no longer even asking what I expect in... Read More >
Herbert Spencer coined the phrase “survival of the fittest” to describe and broaden Charles Darwin’s famous evolution and natural selection theories. The term could undoubtedly be applied to today’s construction and development industries as the challenges of material and labor shortages, increased lead times, rising costs, and the likelihood of increased interest rates continue to take hold. How builders and developers deal with these challenges will likely determine their success and potential survival in the coming years.
There are several approaches that companies are exploring to leverage against the current supply chain challenges that include; developing strategic partnerships with material suppliers, committing multiple projects under a single agreement, pre-purchasing materials, and purchasing production slots months in anticipation of future demand. These approaches will certainly assist firms in ensuring materials are available when needed, but not without a significant investment and the associated financial risks.
Transitioning from 2021 into 2022, material prices have... Read More >
It's a topic we seem to be answering daily, "Where are all the workers?". While it's an issue that spans more than just the construction industry, unlike those other industries, we've been trying to answer this question for decades. For those answers, we have to look at more than just the last 18 months.
Staffing issues in the trades can be traced back to the 1970s when college students increased nearly 25% from 1969-1979. That phenomenon would again repeat itself in the 1990s when that decade saw an increase of over 15%. (Source: Nation Center for Education Statistics). The nation's focus on higher education and white-collar professions set the trades up for inevitable challenges... Read More >
We continue to get buffeted by price increases, seemingly weekly, which puts pressure on our estimates and has a negative effect on feasibility for our clients. Though prices are being locked in for Fall starts up North, clients have repeatedly asked me what will happen to them for their Spring starts. It’s certainly understandable. I’d want to know too. Normally, I’d have a good sense of this, but I don’t feel that I have a good basis to know now. This summer, home building continued at a brisk pace, and lumber peaked at over $1,800 per mbf. Clients kept asking me what they should do at those prices, but this situation was unprecedented. Most locked in, and then lumber started to come down. Jeff Korzenic, Chief Investment Strategist of Fifth Third Bank, said earlier this summer that the best cure for high commodity prices is high commodity prices since it... Read More >
Government regulations have been loosening up lately, but some impacts resulting from them are increasing as construction keeps moving forward. One specific item that comes to mind is material lead times. Items that we were accustomed to being readily available now seem to carry a 2-3 week lead time, and items that were normally 4-5 weeks have jumped to 10-12 weeks. If anyone has tried to buy any furniture or appliances for your home lately, I am sure you can attest to that. This creates unique challenges for our project teams to overcome, but our company processes have been developed to help mitigate these issues for our clients and us.
Purchasing materials early is the essential first step, but that is just the beginning. We have come to learn in the past 18 months that there is a lot of uncertainty in the supply chain industry due to constraints of... Read More >
It has been a little over a year since the COVID 19 pandemic began and we are still feeling the after-effects of its impacts over the past year. With more of the population getting vaccinated and some states loosening restrictions, it feels as though we are getting back to normal but there are still many challenges upon us in the construction industry.
Material supply chain and volatile pricing continue to impact new starts with our Clients as many are eager to get shovels in the ground but we are challenged to hold pricing for extended periods of time like we could pre-pandemic. Then, if we are able to get the project going there are extended lead times that we are dealing with to hold our schedules, timely purchasing to mitigate further price increases and expedited submittal procurement are extremely important in our current... Read More >
With a continued labor shortage across the country and no signs of change in the near future, some firms are looking to/have implemented robots into their workforce to help combat this issue. Robots in their present capacity are being used to perform repetitive tasks like laying brick, tying rebar, hanging drywall, etc. They are also performing demolition, 3-D printing, and assisting with lifting activities. In 2018 the construction robotics industry was roughly a $23 million market, however, this market is being forecasted to grow to nearly $226 million by 2025 according to the article by Tractica. Some of the benefits being reported by those utilizing robots are increased speed and efficiency, higher levels of safety, and the ability to integrate with design software such as BIM. As one who has never had robotics performing labor on a construction project, I am looking forward to experiencing it and to what impact... Read More >
The construction industry in 2017 is being faced with an ever-growing skilled worker shortage which is driving up construction costs and adding time to construction schedules across the country. The current slowdown in immigration after the Trump election is contributing to the already existing labor shortage.
The five toughest craft positions to fill are carpenters, electricians, roofers, drywallers, and concrete workers. According to the Bureau of Labor Statistics and National Association of Home Builders, there are currently 143,000 vacant construction positions nationwide and a recent survey by the NAHB revealed 69% of its members were experiencing delays with completing the project on time due to the shortage of adequate qualified workers.
The Douglas Company tries to help prevent project delays due to manpower by communicating early with every subcontractor the schedule requirements for every project before the contract is even awarded and getting their buy-in prior to schedule commitments. The manpower on... Read More >
The Douglas Company has a number of processes that control costs for our clients, and they have worked well in this inflationary construction environment. But even for us, there are limits that everyone should be aware of. Some were predictable, some not.
Though I’m not an economist, it doesn’t take one to be able to predict that when unemployment nationally is below 5%, it’s difficult to get significant economic growth without growth in the workforce, either through domestic workforce growth or immigration. Though The Douglas Company doesn’t endorse the hiring of illegal immigrants, and we do check green cards, we’ve noticed that the “Trump Effect” has made the situation more difficult, not only with anticipated faster growth of the economy, but a reduction in the Hispanic workforce, leading to capacity issues, and price escalation.
What I didn’t predict was the tariff on imported lumber. Over 84% of our country’s softwoods are imported... Read More >
In the past decade, the construction industry has experienced an exodus of sorts in the construction workforce. According to the Bureau of Labor Statistics, between 2005 and 2015 the construction industry as a whole lost nearly 16% of its workforce. This decrease in manpower accompanied by a large increase in construction (especially in multifamily and senior housing construction), we have experienced an increase in subcontractor workload and inevitably a decrease in subcontractor availability. Subcontractors are forced to either decline work or raise costs to help manage their workload, leaving general contractors and construction managers scratching their heads. Is there a reliable solution to this ever-volatile supply and demand issue? Yes- one word- relationships.
We have found repeated success in forming long-standing business relationships with subcontractors. As we have experienced, designers often time design in a vacuum, without understanding the cost impact of their designs; however, our subcontractors do. The Douglas Company... Read More >
Unfortunately, it seems we can’t build as quickly as we used to. There are a number of factors impacting this. The number one culprit is lack of qualified work force. Secondary factors are the increased complexity of senior living construction, with over the top finishes, building inspection departments that throw roadblocks in front of us, and architects who are busy, eroding the quality of drawings.
Though it’s frustrating, what we see from our competitors indicates that we are substantially better than them. We should be. We have all the systems in place to help us track projects and keep them moving on schedule as quickly as possible. Some of these are as follows:
· Project pre-planning to identify risks and opportunities to assure a smooth running project.
· A design check process to minimize surprises and issues that slow down construction.
· Daily manpower comparison to what’s needed for schedule goals.
·... Read More >