Monday, September 26, 2011
Construction Costs Are Rising Fast
Surprise, surprise. Even as California's economy continues to shudder under the weight of the collapse of the housing market and its depressing aftermath, construction costs are heading higher fast. We got a good example of the phenomenon recently when the trustees in the San Mateo Union High School District learned that bids for a number of big projects came in roughly 30 percent more than projected not all that long ago. Why? It turns out that, over the last several years, financially shaky contractors and subcontractors have gone belly-up, leaving only a few stable firms to bid. Those survivors can now afford to seek more lucrative prices for their work because they aren't being undercut by the weak sisters who have been weeded out. In addition, the cost of building materials (concrete, steel, copper, etc.) is rising quickly. Suddenly, the days of routine low-ball bidding wars are over. A tough, new reality has set in.