2023 CONSTRUCTION COSTS: ARE WE SEEING ANY RELIEF?
It’s hard to believe that we are three years outside of the onset of COVID-19. Even now, its effects continue to shake up the world.
In March 2020, the construction industry saw a historical spike in pricing, an overall increase of about 20-30% in a matter of 12-16 months. Owners were forced to increase budgets or consider value engineering alternatives. Contractors were potentially out dollars for projects already bid and on-site job shutdowns and quarantines created high demand and extensive backlogs. 2021 saw little relief with unprecedented rates of inflation.
It’s the beginning of 2023 and you may be asking yourself, is now the time to build? The short answer – yes. With three years under our belts, Bush Construction has established and refined processes to assist in accounting for pricing changes and supply chain delays. And even better news, we’re starting to see surging material costs plateau.
Better planning with the three Cs: Contingencies, Communication and Collaboration
By now, it’s no secret you may be paying more for a new build or renovation than three years ago. With Bush on your side, we can help you navigate these changes and complexities. Ensuring your budget and timeline are met starts with proactive planning using the three Cs: contingencies, communication, and collaboration.
In commercial construction, a contingency refers to money (often a percentage of the total project cost) reserved to cover unexpected project costs that arise after the construction starts. Contingency budgets have been a part of the Bush process, but have become even more important in recent years as we navigated unpredictable material costs and labor shortages.
So how is a contingency budget typically used?
- Materials: Design professionals and builders must think about materials. What happens if the manufacturer changes, creates variations, or discontinues a product chosen specifically for a project? The price fluctuates! Room should be left in the budget to swap out design materials for sometimes more costly, yet available, options.
- Changing or unpredictable conditions: During estimating, it’s often difficult to account for unforeseen or differing conditions. Not every project site is ready to build on from day one. Old foundations may be buried on site unknowingly, the weather could damage or postpone progress, and much more. Factoring in a contingency would help cover this.
- Wish Lists: Excess funds…it happens! Owners should consider a wish list. The team may end up with an excess of money allotted to the project. This would allow for project betterments previously thought to be out of reach. For example, higher-grade flooring.
To learn more about contingency budgets, check out our blog.
Changes happen quickly in this high-cost and supply chain environment, which means efficient and clear communication with project teams and with owners is even more important.
Typically, an owner may need to engage multiple firms to take a project from concept to completion. That’s not necessary with Bush. As a full-service team, we offer integrated services in architectural design, construction, and real estate development. With open lines of communication between our departments, clear, quick, and transparent communication with owners is just part of the package. We work hard to avoid delays and miscommunication that are common issues in the construction industry.
We’ve recently enhanced our ability to more accurately and effectively communicate costs to owners with our addition of Destini, an estimating software that makes Bush more efficient. Since it is cloud-hosted, anyone on our estimating team can input and access real-time cost data at the office or at home. We are also working to expand historical cost information in the database to more quickly and efficiently estimate future projects. With sky-high interest rates and long lead times creating higher prices and longer projects, Destini aids building owners in managing their expectations for cost.
During the construction phase, we partner with subcontractors and suppliers, which takes a high level of ongoing collaboration. Bush has worked to put an emphasis on subcontractor relationships, but we’ve honed in even deeper on those relationships to help manage the volatility of the economy.
Subs and suppliers are often the first to know about price changes and supply chain issues. Leveraging our relationships and remaining in constant contact throughout each project allows us to alert owners quickly and pivot plans to try to avoid delays and budget increases.
What to expect from construction pricing in 2023
The future looks bright. In the last six months, we have seen construction prices start to plateau and even trend down in a couple scopes.
Lumber was a huge problem, and those prices have come down. HVAC rooftop units are still in high demand, and electrical switchgear maintains long lead times. However, we’re able to anticipate these patterns and plan accordingly.
Though many things have changed since 2020, one thing remains the same: the importance of selecting a construction partner that can guide you through the process.
Contact our team today to get started.