This month lumber prices increased 20% to $650 per thousand board, according to data from Random Lengths. This has been an ongoing story since the start of the pandemic and has contributed to an increase in new single-family home prices and apartment prices by approximately $14,000 and $5,000, respectively, according to the National Association of Home Builders.
Yet overall construction pricing may remain muted, despite the rise in costs which also includes new safety measures. The reason: Contractors are becoming more aggressive with their pricing and reducing their profit to continue to win work, according to CBRE. This reduction coupled with a rise in general conditions nets a slight decrease in construction costs from the previous year, it says.
While construction costs might be going down, COVID-19 is causing site constraints that harm contractors' productivity. CBRE lists limited vertical transportation, staggered shifts and general health and safety checks each day as the productivity issues caused by COVID.
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"Productivity losses have been minimal now as these adjustments are becoming normalized but could carry additional costs if schedules are extended," according to CBRE.
Across major regions, professional fees are consistently expected to drop approximately 10%, according to CBRE. In some projects, delayed project schedules and redesigns have led to elevated costs. However, CBRE says a competitive market with reduced project volume will mostly cause a modest drop in professional fees.
But this won't be uniform. In some instances, COVID will increase demand for certain professionals. For example, as tenants and owners look to improve air quality systems, HVAC engineering consultants could see growing demand.
Technology professionals could also see growing demand as tenants and clients look to ensure more robust connectivity or find new ways to introduce collaboration. For instance, CBRE points to a rise in the use of touchless technology as clients look to roll out new health and safety measures.
Already, some firms are making these upgrades. Granite Properties has made changes portfolio-wide as part of a more than $10 million Inspire Wellness initiative.
"We're in a time of major change and disruption and you can expect the return to the office to look very different, with office owners following CDC guidelines including frequent cleaning and protocols for social distancing and elevator capacity," Will Hendrickson, managing director of Granite Properties' Dallas office told GlobeSt.com in an earlier interview. "You may also see significant long-term and high-tech updates focused on air quality and the touchless experience."
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Leslie Shaver
Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.
