Time to Put Down the Shovel? So Far This Year, We’ve Dropped 3 Projects Due to Breathtaking Construction Cost Estimates

His number came in 100% more than the cost of our last store, and the deal no longer penciled out.

By John McNellis | 28 May 2022

WOLF STREET — A big-time San Francisco contractor told me the other night that he half-wished for another recession. Why? Because his subcontractors — the guys who actually do the work — are so inundated with jobs that they’ve become insufferable: They’re either not answering their phones or they’re handing in stratospheric bids.

His subs may indeed be fattening their profit margins, labor may cost a little more, but construction’s real pain is in the skyrocketing price of materials. Another builder said his costs have risen 15-20 percent in the last 12 months, pointing out asphalt’s 50 percent price spike due to the Russian oil fiasco.

As troubling as pricing is the shortage of critical materials. Just one example: Switchgear — the equipment that transforms the raw electricity in power lines to that usable by a project’s tenants — is only manufactured by three companies in America. Two report a 12-month delay in delivery, and the third isn’t taking new orders. Thus, a developer is faced with a Sophie’s Choice: She can either order her switchgear 6 months before she submits her final plans for city approval (and light a candle), or have her project opening delayed up to a year. […]

Be the first to comment

Post a Comment

Winter Watch

Discover more from Winter Watch

Subscribe now to keep reading and get access to the full archive.

Continue reading