The pandemic did not only cause a shortage and price increases on toilet paper and cleaning supplies—it is impacting the cost of construction materials as well.
The demand for large-scale construction, coupled with the issues in the supply chain created by the pandemic, is rippling through the entire construction market, driving prices up and creating material shortages and delays in delivery. For example, steel bar joists now have a 10-month lead time. We are also seeing significant increases in copper, PVC, vinyl products, drywall, and metal studs. Lumber costs, which have been dominating the news, have risen 57% since January and by nearly 375% since last year, according to Market Insider.
Pandemics and shifts in the market have disrupted construction before, and this time is no different. It is forcing us to pivot, adapt, and re-approach our projects. Other events have forced our industry to do this before, and we have proven to be nimble in the past. In addition to the strategies we outlined in our previous blog “What One Factor Influences Construction Cost the Most?”, it is more important than ever to partner with your general contractor and communicate well and early in the building process. Having your contractor involved from the beginning increases the lines of communication between not only you and the contractor, but the architect and engineers as well.
Owners planning to build or renovate should be prepared for delays and contingencies on material costs. Working with your contractor at the beginning of the process can help mitigate the pain in these areas and help create a plan, such as ordering materials with long lead-times, stockpiling materials, substituting materials or moving toward some pre-fabrication. We have seen fluctuating prices on materials before and have worked with the project team to find solutions. Those conversations need to happen to support your cost control efforts.
Here are a few best practices for navigating through the rising construction material costs:
- Balancing Project Costs. One way to lessen the impact of rising construction costs is to reduce costs on your project where you can. Work with your contractor and design professionals to discuss if they can partially absorb material cost increases through adjustments in labor rates or reduction in fees.
- Alternative Materials. Certain materials at this time are hard to source and result in higher cost to purchase. Another way to address these increases is to work with your general contractor on alternative materials which have been affected by smaller price increases and are more common materials to source.
- Pre-construction Services. We have discussed in previous blogs the benefits of involving your general contractor from the very beginning stages of construction. One way to do this is to use the design-build delivery method. Design-build's benefits are many, including increased project knowledge and understanding of specific goals amongst all parties, thorough development of the project early on, better coordination between all parties and increased project planning and development.
- Be Flexible. Lastly, all parties should try to be flexible given these uncertain times. By working together, owners and contractors can develop unique solutions to project needs and minimize increased project costs due to volatile material costs.
So when could prices come down? According to The Charlotte Observer, many expect lumber prices to fall over the next 18 months due to “domestic production soaring” and U.S. lumber imports increasing. The progressive easing of quarantine measures should allow lumber mills to return to full capacity, and the recent increase in hiring and higher trucker pay are likely to alleviate the current shortage of truck drivers, which should result in less logistical constraints. On the other hand—if demographically speaking—the country needs more lumber in the coming years, can we expect to return to historical price ranges? That we do not know.
With the uncertainty in the market, we are advising our clients that if you are looking to build, there is no better time than now. Waiting for a few months could result in increased prices that may not come down. We cannot guarantee what pricing will be in the next month, let alone the next two weeks. Committing to the cost as early as possible is the best solution for the time being. Though we certainly hope the market will not remain this volatile, here at Brindley Construction, we will continue to provide you with the latest information we have and the best solutions we can find to keeping costs down.
We Do Ask a Favor From You
When it is time to proceed with your project, be ready to commit. Quotes are no longer good for as long as they were before the pandemic. Oftentimes, prices cannot be held longer than 10 days due to market volatility. Therefore, when your project goes to market, you need to be ready to award it and put it under contract so your pricing can be secured and materials can be ordered. Contractors are willing to negotiate to create a mutually beneficial outcome and successfully navigate these unprecedented cost fluctuations.
If you are considering an addition, renovation or ground up construction, don't hesitate to call us today to discuss your options and how we can be of assistance.