FLUCTUATING CONSTRUCTION COSTS
Remodel or Rebuild
The construction industry is currently experiencing unprecedented levels of demand. To add to this, firms and consumers are also battling related price increases. Since March 2020, the combined impact of the coronavirus pandemic, environmental changes, a building boom, and supply chain disruption (to name just a few issues) have caused material and labor costs to fluctuate.
The construction industry is particularly sensitive to economic cycles. Whilst costs naturally fluctuate, the changes witnessed since the start of the pandemic are unparalleled.
We’ll explore what’s behind current price increases as well as what we’re doing to tackle the situation here at Letter Four.
According to the National Association of Home Builders (NAHB), over 90% of construction firms are now experiencing shortages of materials and workforce disruption. They further state that material shortages are currently more widespread than at any time since the 1990s. Plywood, windows, doors, steel, and lumber are just some of the essential building materials in short supply.
The coronavirus pandemic is an obvious contributing factor. Many factories couldn’t run at full capacity, ships couldn’t dock in ports, and transportation was problematic. In addition, tariffs were placed on lumber, and wildfires ravaged the west of the country last summer.
While lumber prices have recently decreased for the first time since the start of the pandemic, they were still up by 121% when comparing April 2021 with the previous year. This price surge added a massive $35,872 to the price of an average family home. Concrete costs have also increased by over 20% in little over a month at the start of 2021.
Added to this is the necessity of employing extra labor to maintain safety standards, meet rapidly changing schedules, and cope with rising demand.
With increased costs and lead times, Letter Four encourages all clients to place FF&E (fixtures, finishes, and equipment) orders as soon as possible. We’re liaising daily with suppliers to ensure we’re up to date, securing the best prices, and communicating appropriately with all parties involved.
Experimenting with new, innovative materials is something we love – and the current situation is no different! If a certain material has recently shot up in price, we’ll suggest and specify the best materials to achieve top results, on budget and on time.
To further tackle rising and constantly fluctuating costs, our bidding process has changed relative to our architectural project phases. Due to changes in material costs coming from their suppliers, our subcontractors are currently only able to guarantee bid prices for up to 30 days. We, therefore, recommend that clients don’t undertake final project pricing until they are ready to build as pricing they receive early in the project will not be accurate when it comes time to build. What’s more, many of our subcontractors have recently been forced to hire extra staff to deal with heavy demand and catch up due to material delivery delays. An increased workforce (and wage bill) means higher costs.
Prices and working methods constantly fluctuate. Despite this, the construction industry is currently experiencing a period of rapid change. To ensure we continue to deliver inspirational design and construction solutions, Letter Four will always communicate any changes and updates as soon as they happen. We’re here to keep our clients informed throughout the process, in the most transparent way possible.