Material Shortages and Price Increases Impact Construction Projects
Even if you don’t currently have a construction project in the pipeline, you’re probably well aware that material shortages and price increases are impacting projects nationwide. Sacramento Business Journal Correspondent Robert Celaschi sized up the situation best (in the Nov. 28 article Materials shortages prompt some to change designs) when he stated, “A series of challenges, from storms to voracious world markets for materials, is stretching timelines and raising costs, forcing some clients to reconsider what they are willing and able to pay for.”
Shortages are being blamed on China’s building boom and the rebuilding efforts following Hurricanes Katrina and Rita. With demand for drywall in the Gulf Coast rising, suppliers can expect costs to rise into 2006. In the November 2005 Spaulding & Slye eReport article Construction: Price Instability to Continue, Mark David explains the impact: “With drywall comprising between 10 and 15 percent of the cost of a typical tenant fit-out, another 25-percent increase would bring the overall cost of these jobs up by 7.5 percentage points in 2 years.”
Elevated gas prices are causing increases in petroleum-based products such as flooring, PVC, carpet, and paint, according to David. And the increasing building activity in China has been cited for the elevated prices of concrete, wallboard, and steel - which have risen in price by 40 to 50 percent over the last few years, according to the Sacramento Business Journal article.
To accommodate these conditions, David offers the following insight: “With construction demand continuing, value engineering efforts must be nimble, ready, and able to generate creative solutions to deal with fundamental shifts in the economy, such as those from unforeseen environmental events such as catastrophic hurricanes, as well as significant worldwide geopolitical events.” Celaschi findings concur. “Flexibility is the watchword,” he says.
