The Future of Construction Costs?
In yesterday’s Third & Bond post, the folks from Hudson Companies laid out several scenarios for construction costs could be impacted in the coming months by the evaporating pipeline of development projects. While they expected to see the cost of materials fall somewhat and the quality of work go up, they predicted that “prices won’t…
In yesterday’s Third & Bond post, the folks from Hudson Companies laid out several scenarios for construction costs could be impacted in the coming months by the evaporating pipeline of development projects. While they expected to see the cost of materials fall somewhat and the quality of work go up, they predicted that “prices won’t go into a free-fall.” We heard an anecdote yesterday, however, that suggested otherwise: An architect told us that a contractor who had bid $1,750,000 for a job a few weeks ago just came back and lowered his bid by $150,000, or almost 10%. His logic? He’d rather give up his profit margin and be able to keep his team intact than not have enough work to keep his key people busy and fed. Are any readers in the midst of negotiating fees with general or sub contractors right now? What are you seeing?
Photo by deadrichmond
Construction costs are already down. The price of steel coming in from China has taken a dive. I’m an architect and we were supposed to start construction this week and both the client and contractor have decided to put it on hold, wait until after new years to re-negotiate pricing with all the sub-contractors and move ahead saving a great deal of money.
Nothing, boroughbred. But 10% would be welcome compared to what usually happens. But overruns were there during the market frenzy and they’ll be there when the market finishes tanking. So really, they cancel out. Contract change orders are the name of the game for contractors.
What prevents a contractor from giving a low bid/estimate and then coming in 10% over budget. I expect you will see more of that than anything.
Thanks 99 luftballoons.
Boerum Hill – I’d suggest asking the owners of 54 Butler St as they did just that. Although they had to demolish the existing house rather than just building from scratch on a vacant lot.
Has anyone built a house from scratch in Brownstone Brooklyn. Would be interested to know what the cost difference is between renovating an existing building and building a house on a vacant lot.
Prices will come down. How much depends on what happens with the economy in the next months. Most shops I know still have work from the overhang of a very busy summer. But everyone is looking to fill in scedules for the beginning of next year and there are fewer jobs out there. You should expect to negotiate a good discount if you’re starting now, but I would be careful of huge price cuts as these are the companies that disapear and go out of business.
Re: price of oil – see NYT 2 days ago:
http://www.nytimes.com/2008/11/12/business/worldbusiness/12oil.html?scp=3&sq=oil%20price&st=cse
Oil has recently dropped from its high of $145 (in July) to $59/barrel. How is that not “plummeting”?
it is hilarious that the contractor says he will lower his price 10% as if that were his profit margin. Contractors in this city (especially the higher end ones)shoot for 50% profit. They still have a ways to go down before they are losing money on projects.