CHICAGO—@properties has just released its latest annual development market report, for which it completed almost 100 surveys with developers, bankers, architects, contractors and its own developers. In addition to analyzing trends in neighborhoods such as River North, the Gold Coast, the South Loop and others, the real estate brokerage firm asked its respondents to identify the principal risks for residential for-sale development in Chicago this year.

“This is the most comprehensive @report we've ever assembled, and the best thing is that the most important insights are coming directly from the people who are designing, building, financing and selling new, for-sale construction in Chicago,” says Michael Golden, co-founder of @properties, the city's largest brokerage by market share. “It's not just an analysis of the market from 30,000 feet. It's people from all sectors of the industry saying, 'Here's what we're dealing with. Here are the big challenges and the big opportunities.'”

When asked to name the top three concerns, the one that was considered the most worrisome was rising construction costs. Those costs have been increasing for a few years, and 2016 is not likely to provide any relief. “General contractors responding to our construction survey were unanimous in forecasting 1% to 5% growth in the overall cost of condo/apartment construction for 2016,” according to the report.

And even though a global slowdown may curb increases in the cost of materials, a skilled labor shortage will probably keep pushing up labor costs. Most respondents trace this shortage to the mass exodus of workers from the construction industry after the financial collapse of 2008. Many had found other occupations by the time the demand for new construction returned.

“It has been estimated that 25% of construction workers left the industry over the past eight years, and fewer young people are entering the trades,” says Rory Tihinen, vice president of pre-construction at Leopardo Cos., Inc. “Labor shortages in the skilled trades, particularly in vertical cast in place concrete, precast concrete, rebar and glass, are affecting projects most, with precast lead times nearing 20-year highs.”

Robots that can handle construction don't seem likely anytime soon, so the survey respondents came up with a low-tech solution. They advised getting your general contractor involved early in any new development process. The feeling was that when contractors are part of meetings with architects, marketers, designers, and developers, the whole process should proceed with far greater efficiency.

“Engaging a sophisticated contractor early in the planning stages, lowers risks, saves time and money, and stretches construction dollars in so many ways,” says Tihinen. “Most important, it identifies accurate, guaranteed construction costs, and schedules far sooner than traditionally possible.”

Instant Insights /

Rising Construction Costs Worry Condo Developers

Related Stories

Recommended For You