Construction costs increased30% again this year. A fact that is both astounding andunbelievable to developers. While recent tariffs have put pressureon raw materials costs, a shortage in construction labor is thechief driver of the rapid increase in construction prices. In somecases, workers have left active job sites to follow more lucrativeoffers. Developers on the Identifying Development &Redevelopment Opportunities in the Middle Market panel at RealShareApartments this week said that this was one of the biggestchallenges. Mike Rovner, president at MikeRovner Construction moderated the panel, which includedDylan Simon, EVP at ColliersInternational; Moses Kagan, co-founderand manager at Adaptive Realty; MichaelDowling, senior director at AvalonBayCommunities; Kimberly Laten, founder ofColor Design Development Group; and JamesD'Argenio, senior principal of acquisitions at TheBascom Group.

Forming strong construction partnerships, paying quickly—withina couple of days of finishing a milestone—and keeping workers busywere among the top ways that developers are keeping constructionworkers on sites through a deal. “For us, the key is having anexcellent construction management partner,” said D'Argenio. “Theyhave critical relationships up and down the supply chain.” Dowlingadded that speedy payments have been the incentive that has workedfor them. “We have been doing everything that we can to pay them asquickly as possible and keep the workers that are performing well,”he said. Kagan said that the payment strategy works well. “We arepaying within a day or two of reaching the milestone for aproject,” he said.

Of course, payments within days of completing a project isn'tpossible for every developer. Rovner pointed out that smallerdevelopers have the ability to be nimble enough to change alongsidethe market. A larger firm, like Bascom Group, can't accommodatepayments within days of completion. However, D'Argenio said thatthere are other incentives. “We probably aren't as fast as thesmaller shops. That is why it is important to have strategicpartnerships, not because of quickness of payment but also becauseof the integrity of the project and the deal,” he said, adding thatit is also important to deliver. “It doesn't do anyone any good toover promise, so communication, swiftness of payment will keepvendors coming back to your project.”