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the
newsletter of tbd consultants - edition 1, 1st qtr 2006 | ||||||||
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Printable PDF version
Bay Area Construction Market | ||||||||
Construction
Management Specialists | ||||||||
Bay
Area Construction Market Over the past two years, ending December 2005, construction
costs have increased typically in the range of 30% but varying on the type of
project and risk factors identified. Looking
forward, the estimating of future escalation still carries more uncertainty than
most interested parties are comfortable with. Material costs continue to gyrate mostly in an
upward direction but not in any predictable fashion e.g. copper pricing has hit
new highs lately; oil pricing has grated upwards and then bounced down; structural
steel stabilized and then started to move upwards again; lumber could come down
if the agreement on Canadian lumber imports is ratified; concrete unit rates for
supply continue in an upward trend. Labor rates continue to move upward but in
more predictable fashion with most labor agreements set for a period of at least
two years at a time. (Currently escalating in the range of 4% per annum) Real
inflation however will reflect not only the raw cost of materials and labor
but the market of supply and demand in any particular sector. The balance of the
volume of work and the availability of qualified general/subcontractors willing
and able to compete will set the real inflation factors. Some
sectors have been impacted more than
others with a large volume of work chasing a limited number of interested and
qualified general/ subcontractors. A selection of those sectors is as follows: Medical (OSHPD and NON OSHPD): This sector has
an acute problem with too few qualified and available subs willing to provide
competitive bids. The anticipations are that this sector will not be in balance
for some time to come. The risk factors associated with OSHPD overview and approval
process has exacerbated this sector. A healthy contingency for escalation and
bidding contingency is imperative. Private Sector:
This is led by the Biotech and Pharma clients who may have budget concerns but
are also driven by schedules. Design/Build is popular and the vehicle of choice
where speed to deliver the building is the driver. The
Office market is still in recovery mode however there are signs of life in
some localized markets. The Condo market is
alive and well. The inner cities have mega projects proceeding and moving into
construction. However there have been some projects shelved as a result of escalation
and proformas not attainable. Senior Living Units:
The market is showing life and should continue to grow Public
Sector: Funding has been difficult with recent escalation producing a large
disparity between budgets set some time ago and the real cost of today. Many of
these projects have required scope and/or budget revisions. Escalation
moving forward is never easy to predict with many external forces all providing
risk factors which the contractors have to assess. Now more than ever a constant
review of the market is required to adjust to changing market forces. Our
prediction on future escalation, based on our discussions with contractors
and vendors, is the following: The
above are average factors and should be adjusted depending on the project and
risk factors present. Also the above should be reviewed on a quarterly basis and
adjustments made. | ||||||||
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What is ‘Facilities Management’, who does it, how and why? We take a look at the range of services that might fall under this heading. | ||||||||
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Project
Management What services are involved in project management, and what approach would we advise be used when managing a construction project. Tony addresses these issues in this article. | ||||||||
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Industrial
Buildings What are the issues affecting the design of industrial buildings, and do these vary around the world? We address these issues and look at what factors affect the cost of these buildings. | ||||||||
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Design consultant: Katie Levine of Vallance, Inc. |