Construction Costs: Price Increases are Already Here

The much ballyhooed threats of price increases for construction materials are finally arriving. We’ve seen two price increases on steel in the last 4 weeks – and we’re being told to expect at least one more within a short period.

For example, steel studs for light gauge framing has gone up 10% in the last 30 days.

Other costs are going up as well:

• Copper pipe and wiring, rental equipment, diesel fuel and gasoline. 
• Lumber is up 3.4%.
• Ceramic tile 2.3%.
• Diesel 2.3%.
• Structural steel 2.1%. 
• Concrete, on the other hand, seems to be holding.

What’s happening? Well, several things appear to be finally coming home to roost:

• Steel prices are going up due to increase costs of iron ore as well as coking coal (affected by the floods in Australia of all things.)
• Crude oil is approaching $100 per barrel is affecting everything. From the cost of production to the cost of delivery. Get ready: $4.00 per gallon gasoline is going to be here before you know it, and some are predicting $5.00 per gallon sometime within the next 12 months.
• Rapid inflation is an ongoing and now an ever-looming threat. According to Reed Construction Data, the Construction Materials Price Index jumped by 9% in December. This represented a 5.4% increase from a year ago. It appears that everyone is predicting this for the near and foreseeable future. This inflation is being driven by (1) higher world demand, (2) raw materials costing more (see above); (3) delayed response by the suppliers to this stronger demand. We’ve talked about inventories being depleted – this is a reflection of that.

• Shrinking contractor margins which have pretty much absorbed construction cost increases for the last year are now coming to an end. The contractors (that remain) are now beginning to raise margins and demand better payment terms.

All this being said – now what? We’re not seeing many inquiries to look at new construction. We are beginning to see an increased interest for remodels and reconstruction. Older retail centers and commercial buildings in established neighborhoods are starting to get more interest. The cost of gasoline is going to start putting a lot of pressure on the cost to commute – from the far, far new neighborhoods (which there are fewer of currently) back to the established business centers.

While this may give you a negative impression, the reality is that even with these cost increases coming, we’re seeing an increase in interest from developers and property owners. We’re hearing optimism from the leasing agents. There is money and interest in rebuild/remodel projects. Interest and money for the newest center out in the newest mega neighborhood is out there but not at the feverish pitch we all grew to love. A fresh face on an older center in a close-in neighborhood to attract those cherished new tenants seems to be the focus right now.

Well, that’s what we’re seeing. How about you? I’d like to hear your opinion on this. Call me or email me. Let me know what you think.

Be Blessed.

Dave and the Sykes Team

The People Who Work Here: Dominic Crespo, Project Manager

Dominic Crespo is one of Sykes’ “go-to” guys. Dominic has a decade of wide-ranging construction and real estate experience. He has established a reputation as a problem solver and one of those special people that bring the project in on time and on budget.

At Sykes, Dominic’s management efforts are crucial to the on-going success of the Toys R Us and Northern Tool and Equipment projects. His continued application of Sykes’ project management principles has allowed Dominic to routinely start more projects like two most recent ones located in Austin, Texas. These two projects are Texas Bright Ideas and ITT Technical Institute. While these projects are underway, he has also successfully completed a Toys R Us located in San Antonio, Texas.

A graduate of Michigan State University with a degree in Building Construction Management, Dominic was President of the Student Builders and Contractors Association (SBCA) . Dominic loved the time he spent in East Lansing, Michigan, while studying at MSU, and is an avid Spartan fan.

His experience ranges from single-family housing, office, retail, industrial and beyond. Dominic’s sales and field management positions with Ryland Homes and Centex Homes prepared him for his commercial career with CASCO as an architectural project manager. Dominic came on board with Sykes right after his time with CASCO, and has brought to the table a special skill set that allows him to effectively communicate with subcontractors, inspectors, owners and architects alike.


The Sykes Team

Examples of Our Work: Toys R Us

We here at DSKW & Associates are proud of the work we do and the people who work here getting that work done.

As one of the few true design/build firms in the nation, we are very fortunate to have worked on and completed a number of projects.  Our partners and clients in the big box retail segment included Toys R Us.

This national retailer is using a strategy of pairing their flagship Toys R Us brand with the Babies R Us offering.  In the case of the Texas stores, we are reworking existing structures, ranging from housewares stores (Northpark, Dallas) to supermarkets (Las Colinas).

Timeframes and schedules were clearly adhered to. Budget discussions were regular and project management meetings top of mind.

For more details on how this project was managed and accomplished on time and within budget, please contact us at DSKW & Associates.

The DSKW Team