Mainebiz

V O L . X X I X N O. V I I I A P R I L 1 7 , 2 0 2 3 24 R E A L E S TAT E / C O N S T R U C T I O N / E N G I N E E R I N G F O C U S go up in the 20% to 30% range over the past two years. "We are starting to see stability in the marketplace," French adds. "It's not as volatile as it once was, espe- cially with the steel market." Some recent numbers on lumber have shown cost decreases, says French. "Our thinking is that higher interest rates have dampened residential con- struction, and that lower lumber demand trickles into commercial construction — even though we use less wood — and translates into lower prices," he says. Other impacts to the industry are the costs of fuel and rising interest rates. "Additionally, the lack of labor out there is hurting productivity, which pushes costs higher," says French. Taken together, the result is that some projects take longer to go from concept to putting the shovel in the ground, says French. "But the good news," he continues, "is that we're not seeing projects get canceled. We just need to work harder along with our clients and design part- ners to figure out what combination of program, scale and materials will even- tually get the project to work." e company addresses supply chain issues, on almost all of its projects, by pre-purchasing long-lead equipment — such as electrical switchgear, generators, rooftop units, and HVAC equipment — at no additional cost to the customer. Some of the items otherwise could take up to 16 months for delivery. "Securing these items ahead of time ensures that project schedules won't be impacted and mitigates cost risks to our clients," says French. "Our preconstruction team is working on projects 12 to 16 months out securing long-lead items." Escalation leveling off Jeff Zachau, president and CEO of Zachau Construction in Freeport, says he doesn't anticipate the industry will see an overall pricing decrease. However, he continues, "escalation has leveled off and some commodities have decreased from peak 2022 levels. Many industry experts are continuing to forecast overall price escalation of approximately 5%." Production and supply chain dis- ruption originated during the pan- demic, "but high demand and a con- tinuing labor shortage nationwide have contributed significantly to the price escalation," he says. In a sample price comparison, Zachau says that, in recent years, the company has built over 500 units of affordable housing. "Four to five years ago we were see- ing projects built in the $200 to $230 per square foot range," he says. "Currently projects are coming in the $310 to $340 per square foot range." While supply chain issues have eased, there continues to be significant disrup- tion and delays associated with HVAC and electrical gear, requiring early pro- curement of the long-lead items to avoid significant project delays. Strong backlog Zachau says that his firm hasn't had a project canceled as a result of increased prices. "Owners are forced to make difficult decisions impacting their original pro- gramming," he says. "Understanding the non-negotiables for the owner and where they can compromise is foundational in the construction management process and bringing a project to budget." Materials that have been particu- larly volatile, says Zachau, are con- crete, insulation and paving material, which all increased approximately 30%. Gypsum material increased over 100% from the previous year. However, he continues, those com- modities could trend downward in price as single-family home produc- tion declines. Also trending upward are copper and aluminum, while dimensional lumber, plywood and steel are trend- ing downward, he adds. "However a strong backlog for subcontractors and labor shortages continue to apply upward pressure on the final installation of these materi- als," Zachau says. Flexibility and options Tonello notes that commodity prices have been declining, but "the same price reductions are not reflected in fabricated components, meaning after labor has been put into finished or fabricated components. He adds, "Other factors that are contributing to driving higher mate- rial costs related to complex, high demand components such as electrical switch gear, electrical generators and HVAC equipment." A key strategy to mitigate the issue, Tonello says, is providing and planning » C O N T I N U E D F RO M P R E V I O U S PA G E We are currently experiencing less volatility and therefore increased predictability. — Matt Tonello Consigli Construction We are starting to see stability in the marketplace. — Kevin French Landry/French Construction F I L E P H O T O / T I M G R E E N WAY P H O T O / C O U R T E S Y O F C O N S I G L I Matt Tonello, director of operations/ Maine for Consigli Construction, says the industry is experiencing less volatility and therefore increased predictability. Kevin French, CEO of Landry/French Construction, says that, in general, his firm saw project costs go up in the 20% to 30% range over the past two years.

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