More on Construction Cost

CoStar.com has an informative interview with Kenneth Simonson, Chief Economist for Associated General Contractors of America. He was not optimistic about construction cost coming down particularly because of the sustained growth in developing countries like China and India. He stated steel and asphalt are the two main materials busting commercial budgets.

Source: CoStar.com

Coping with Higher Construction Cost

A recent CoStar article titled “Building Smarter: Strategies for Brokers and Developers on Managing Spiraling Construction Cost” discussed the potential that the dip in oil and commodity prices and the stronger dollar might lower construction cost in the short term. The article concluded that we should not expect this trend to continue and will likely foresee continued volatility in the markets. The article also addressed strategies for coping with higher construction cost. They included the following:

1. Avoid project 'scope creep,' and build lighter
2. Purchase materials smarter and in bulk
3. Know where the dollars are spent
4. Change the palette of materials
5. Build green and reap the benefits
6. Integrate more revenue-generating space and features
7. Leverage the contractor as a development partner
8. Bring the builder onboard early and consider design-build as an option
9. Fast track it
10. Build smart, energy producing or self-powered projects

What surprised me was that the rise in construction cost still catches projects off guard. Pierre Cowart, Vice President Leopardo Construction, was quoted saying

Despite ample publicity about the rising price of materials and cost overruns, "these issues still fly under the radar until too late in the project on at least 30% to 40% of the projects we’re working on," Cowart said. "When we get involved later in the process, it costs more to make adjustments to the project scope."

Here is a link to Leopardo Construction's white paper titled "Smart Construction:
Economical Building Solutions to Offset Soaring Material Prices". Great Resource!

Source: CoStar.com

More Good Economic News for Landscape Architects

Piggy backing on my last post about the increasing demand for landscape architects, Landscape Architecture and Specifier News published another industry survey. In fact it was hard to tell if they were not the same survey. I could not find any indication if it was. Regardless, it had a lot more information than the ASLA press release. LASN reported forty three percent of firms surveyed a ten percent or more increase in 2007 revenues as of the third quarter. Fifty-two percent of the firms anticipated a better year next year. This is good news. I hope they are right. LASN predicted growth in all listed non-residential sectors. This included an increase of 12.5% for Hotels in the Commercial/Industrial Sector and 9.8% increase in Public Safety within the Institutional Sector. (link to entire list). I found it surprising that LASN was much more optimistic than the consensus figures between McGraw-Hill Construction, Global Insight, Portland Cement Association, Moody's, FMI, and Reed Business. Collectively, they predicted a 5.2% increase in Industrial facilities and a 5% increase in healthcare facilities as their top 2 sectors. They predicted a net decrease in retail by -0.9%. I would lean toward these more conservative figures. I may be pessimistic but the current credit crunch has to be a big factor. On the flip side, I was talking to an architect recently and they said many of their clients had thought they could wait out the construction price increases before making commitments, but are now realizing the high prices are here to stay, so they are now moving forward on projects. A recent report from Reed Construction Data confirms that construction cost have slowed, but rose 1.4% in November. Of course, all of this talk about the economic outlook is about the US market. For those working abroad, particularly in red hot China, things may look much different.