Plan and Design Now to Take Advantage of a Buyer’s Market

NewGround
April 22, 2009 | COMMENTS

Despite the stumbling economy, now is the ideal time to plan and design your next building initiative. It's a buyer's market. Material prices are dropping, available workers are abundant, and land is cheap.

Owners should take advantage of these market conditions to stay ahead of the competition, and be prepared for when the market turns, because timing is everything. Owners need to prepare for market rebound before today's bargain pricing disappears.

The price of construction materials has plummeted. “The industry is seeing some of the lowest material pricing we've seen in years. And these numbers are likely to decrease more before we see the market return,” says Bob Mannion, senior vice president of construction for NewGround.

According to ENR, oil has dropped nearly two-thirds from over $140/bbl in July 2008 to under $50/bbl at the start of 2009. The prices of many construction materials have also fallen:

• Asphalt paving has dropped from a peak of $29.50 per square yard installed in the third quarter of 2008 to $20.25 per square yard installed currently for a 31% drop.
• Structural steel has fallen from a crest of $4,800 per ton installed over the last year and a half to $3,200 per ton installed currently for a 33% decline.
• Lumber has dropped from a peak of $4.50 per board foot installed in mid-2006 to $2.75 per board foot installed currently for a 39% drop.
• Plywood has fallen from a high of $86 per sheet installed in mid-2006 to $54 per sheet installed currently for a drop of 37%.
• Drywall has decreased from a high of $58 per sheet installed in late-2006 to $38 per sheet installed currently for a drop of 35%.
• Copper has dropped from a peak of $3.20 per pound in early 2007 to $1.40 per pound currently for a drop of 56%.

The price hikes and material shortages that dominated the construction industry for the past few years have temporarily ended, as well as the employee shortage.

Workers Available

Just a few years ago construction activity was so strong it was also exponentially driving up the cost of building in some markets. Subcontractors and suppliers in these markets were so busy they were able to pick and choose the jobs they wanted. If a project was not considered desirable, contractor quotes seemed liked courtesy bids, being as much as two to three times the estimated cost. Fortunately, those days are long gone.

The economic recession took a deep bite into construction growth during the last quarter of 2008. The U.S. Department of Commerce reported that the total construction put-in-place, at a seasonally adjusted annual rate, peaked in September of 2008 at $1.089 trillion before falling steadily to a $1.054-trillion annual rate last December. On a year-to-date basis, preliminary data for all construction put-in-place during 2008 was down 5.1% from 2007's cumulative total.

According to the United States Department of Labor, employment in the construction industry has fallen from its peak in 2007 by 1.7 million jobs, resulting in an unemployment rate of 18.32%.

After several years of labor shortages, the industry is now experiencing a temporary bout of high unemployment. According to NewGround president and CEO Kevin Blair, from an owner standpoint, this is a good thing. “Talented and experienced individuals in both the architectural and construction industries are abundant in today's market, and they're available now to plan, design, and construct projects,” he says.

New Ground is a full service design and implementation firm based in St. Louis, Missouri.