Quote:
Originally Posted by BuildItUp
The longer this project delays, the more expensive it will cost to get built due to price increase of commodities such as steel and concrete and the drop of the dollar. I say the chances of this building betting built anytime soon is very grim and I HOPE AND WISH THAT I AM WRONG.
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Construction costs could potentially become a significant threat to ACC's viability, perhaps even greater than not securing a tenant, supplemental funding, rezoning, or garnering enough public support. Unlike the funding issue, the costs of creating and transporting building materials are directly related to the current state of the economy. At an initial proposal of $800 million (likely not including the cost of extending the Suburban Station concourse), imagine what steel that costs a third more is going to do to that figure when multiplied over 1,500 feet...and that's just steel. Again this is ONE article, and its scope of the problem is pretty meager, and perhaps a lead tenant, strong public and political support could help pick up the tab, but i'm not a developer so I don't know how these things work. Anyway, onto the article ...bucks native originally posted this article on 5/26/08 (#6612) in the Philadelphia Development Thread VII.
This article
From here:
http://www.thetimes-tribune.com/site...d=590572&rfi=8
“They hand you bids and say, ‘This is only good for 15 days.’ ”
Construction expenses are building like a skyscraper, piled higher by prices for raw materials and energy. The spiral is causing some developers to reconsider decisions or revise projects.
“Construction materials costs are likely to be up indefinitely,” said Kenneth Simonson, chief economist for the Associated General Contractors of America, a trade group based in Arlington, Va.
Material costs soar
Steel weighs heavily in the upswing. Prices for hot-rolled sheet steel have increased up to $300 a ton since December, to about $850.
“Structural steel is about a 35 percent increase, and our ornamental steel went up as high as 57 percent,” said Bob Glynn, sales manager at Scranton Craftsmen Inc., in Throop, which fabricates steel fencing, gates, rails and steps. “That is all over the last 60 to 90 days.”
Copper prices advanced close to $3.80 a pound last week, 70 percent higher than year-ago levels. Prices for aluminum, plastic pipe, concrete and plywood are soaring.
The run-ups are linked to increasing development in emerging counties, such as China. Higher materials prices worldwide and the dollar’s weakness, which spurs overseas demand for U.S. products, contribute to the upswing, along with climbing energy-related manufacturing and transportation costs.
Transportation’s role
“Diesel fuel is a big reason construction costs are going up sharply,” Mr. Simonson said. Local diesel prices have jumped 60 percent in the last year.
The momentum creates difficulties for contractors when they deliver cost estimates.
“They have no way of predicting what their materials costs will be, even a month down the road,” Mrs. Davis said. “It’s important to keep projects moving quickly to lock in the costs.”
Impact on plans
“Almost every two weeks, you’ve got to figure your costs. Every other week, they change product prices,” said Mr. Siniawa, who heads a Dickson City company that specializes in commercial development.
The momentum creates difficulties for contractors when they deliver cost estimates.
Construction costs are too volatile to determine the outcome.
“We can’t begin to build what we were going to do last year,” he said.
“Our construction costs are way up. They are up 30 percent” in the past year, said Mr. Zubert, president of C.F. Marts of Pennsylvania.
“How much rent are you going to charge (to cover costs)?” he wondered. “It makes no sense to build today, given these prices.”
The steady advance creates edgy suppliers and skittish developers.
“I have no idea what tomorrow is going to bring. It’s really deadening the industry,” said Mr. Glynn, of Scranton Craftsmen.
“We’ve got to stop and think, should I do this or can I do this?” Mr. Siniawa said. “I’d like to keep building, but we’re really cautious now.”
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