MGM National Harbor Could Drive Up Building Costs

NATIONAL HARBOR, MD—The economic benefits of the MGM National Harbor project here include the creation of thousands of jobs during the construction phase of the casino resort. However, not all the impacts from the $1.2-billion development are positive.

In fact, one development executive says that the MGM National Harbor project and other large-scale construction jobs could cause other developers to have to dig deeper into their pockets to pay for higher construction costs.

"In fact in some of the cities, some of the larger projects like the potential casino that's going to be built in Everett (Massachusetts) and the current casino that's being constructed at National Harbor are major users of both materials and labor," Douglas Linde, president of Boston Properties Inc., told investors during the company's Jan. 30 earnings call. "And given that the revenue models of those types of projects are such that time is critically important, they are prepared to pay whatever it takes to get resources, and that impacts the overall availability from a construction perspective in those markets as well. So we're seeing it and we don't expect for it to abate any time soon."

Linde said Boston Properties is budgeting for annual construction cost increases of up to 4.5%, according to the Washington Business Journal. Association of General Contractors of America spokesman Brian Turmail says that construction material costs have generally remained flat with the exception of gypsum board.

He adds that the recession caused a decrease in the number of subcontractors and qualified construction workers, and most general contractors "are reporting they've having to pay more and pay more benefits to retain and recruit qualified workers." See story in the Washington Business Journal.