What’s Up with Rising Construction Costs

By February 28, 2017Architecture, Community, Design, News

It’s still early 2017, but the indicators for a very strong year for the design, construction, and real estate industries in Utah are very favorable. Homegrown Utah businesses are growing and Start-Ups are blossoming, Out-of-State interests have decided that Wasatch Front is “the place to be”, and therefore its population is projected to double over the next twenty years.

Having attended numerous seminars and discussions regarding the health of the Utah economy thus far this year, the general consensus, we are happy to report, is that Utah is “Booming”, and should keep on booming for the foreseeable future. Our friends in real estate and development see unfulfilled demand in every sector. Commercial, industrial, retail, residential, and everything else are all indicating the existing inventory to be near saturation, thus requiring new and unique product. So, the “good news” is we in the design and construction industries have the opportunity to be creatively busy for some time.

When there is “good news”, there is always “bad news”, and the bad news is that construction costs continue rise each year month. The typical items, such as material costs, have had their standard incremental increases annually. The variable has become labor. The recession of 2007-2009 saw a real thinning of the skilled construction workforce along the Wasatch Front. Those that maintained their positions, and kept busy were happy to stay where they were, and the labor costs stayed fairly stable for a few years. However, the strength of the construction market over the past three plus years has exposed the lack of depth related to “skilled” craftspeople, and has created a very volatile labor market. We have been told that the labor rates for many of the construction sub-trades have increased as much as 20-30% in just the last year. The uncertainty is having a significant impact and making it extremely difficult to accurately provide long-range project cost forecasts, and thus budgets are being impacted by labor cost contingencies.

So now we know, and to steal a line from the old “G.I. Joe” cartoon, “Knowing is half the battle.” That’s kind of like saying “Knowledge is Power”, and it is. We have found that by integrating the combined knowledge of all project stakeholders, we, as a team, can develop a more refined definition of the project. Identifying what is a “Successful Project” for all, and the path to get there. Understanding that “On Budget” is typically a key element of that success, we take the approach that we need to be “stewards” of your project dollars. That is a challenge that we embrace as an opportunity to collaborate and provide creative and unique solutions for success. We look forward to the challenges 2017 will bring, and look forward to turning those challenges into opportunities in 2017 and beyond. – Your friends @ SH Architecture

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