A year ago, I wrote about some of the factors that can drive up the cost of construction. The common thread between the 7 factors (tariffs, materials, labor, site logistics, code issues, design changes, and foundation) was that each issue is usually unforeseeable but can be properly planned for or managed. Well, 2020 has rocked the boat on the standard “unforeseeable” challenges. Our industry has spent the year adapting to seemingly constant change and new challenges — from increased safety protocols to protect on-site workers to fluctuating construction costs. The financial implications from COVID-19 have caused a spike in cost in some areas and dips in prices in others. Here’s some of the most significant impacts on cost we’ve seen so far.
It Pays (and Costs) to be Safe
One of the most significant new or increased costs we’ve seen throughout this pandemic is with heightened health protocols and cleaning. Our sites are doing nightly deep cleanings of work areas. Some of our projects have medics at the gate to screen employees. All the miscellaneous supplies like masks, hand sanitizer, and disinfectant wipes add up over the course of a major construction project. However, most contracts that were signed before COVID reached the U.S. don’t include clear language on who is responsible for those costs. In our experience, we’ve been able to work with our clients to split the costs so projects can continue to run safely, and the work progresses. Moving forward, these increased costs to maintain health and safety and stay in compliance with local mandates will need to be discussed and included in project’s budgets.
Volatile and Unpredictable Materials
As a builder and preconstruction professional, I hate the unpredictable. I would much rather plan projects down the smallest detail and hand owners a reliable budget and schedule they can trust. The ongoing pandemic has made many longtime stable and reliable materials, suddenly unreliable. For example, lumber has historically been an affordable and readily available material. However, in the wake of COVID-19, the price of wood has skyrocketed to record-breaking totals. You can read more about what cause the sudden boom in cost here. Right now, we’re seeing the price of glass increasing — about 8 to 12% on projects where costs are not currently locked in or materials secured. We can’t predict which materials will increase or decrease in cost, but we can prepare. The earlier you engage your contractor, the earlier they can lock in pricing, secure materials, and safeguard your project from price surges moving forward.
Putting a Price on Labor
Ah, labor. Without skilled trade partners, projects simply couldn’t be completed. That’s why the cost of labor and the ongoing labor shortage have been such a hot topic of debate for years. It’s been a key factor in increasing construction costs for a long time. As other project prices have been impacted by COVID, many in our industry predicted the cost of labor would decrease because construction projects would come to a halt. However, our industry has stayed resilient and essential. For the most part, projects continue to progress, and new projects are being planned. For the market sectors most severely impacted by the pandemic, like hospitality and retail, we’re seeing owner find ways to adapt properties to align with current climate and their customers’ changing needs. Still, on recent project bids we have started to see more competition, and with it more competitive pricing, in trades because most companies don’t have a stable backlog. As these companies continue to burn off their backlog, the cost of labor is decreasing. Therefore, in some markets we are seeing an incremental decrease in overall cost of construction.
This year has taught us all many lessons in adaptability, patience, and appreciation. I’m very grateful our industry has remained essential and we’re able to keep working for our clients and help keep our local economies open. Maybe the biggest lesson we’ve learned this year, is to expect the unexpected. And to expect those unforeseen challenges to keep popping up to throw a wrench in our plans. The good news is that contractors are extremely skilled planners and have spent their careers learning how to adapt to any challenge that arises. My advice would be to engage your contractor when you hire your architect. The earlier your builder can collaborate, plan, secure materials, and hire trade partners, the more predictable and reliable your schedule and budget will be — even in an unpredictable climate.
