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Costs and lead times for construction materials continue to surge, though contractors say their project pipelines remain strong. Costs and lead times for construction materials continue to surge, though contractors say their project pipelines remain strong.

Firms, clients rethink construction projects amid ‘unprecedented’ surge in material costs

BY Sunday, November 21, 2021 06:20pm

Prices and lead times for construction materials continue surging to historic levels, yet local architecture and construction firms say their workloads aren’t being adversely affected.

An index of input prices — the prices that producers and service providers such as distributors and transportation firms charged for inputs for non-residential construction — were 21.1-percent higher in October compared to a year earlier. That included a 1.3-percent increase since September, according to an analysis conducted by the Associated General Contractors of America.

“We have seen an unprecedented surge in construction materials pricing and labor pricing over the course of the last two years,” said Chris Beckering, executive vice president of Pioneer Construction Co. “Simultaneously, we’ve seen historic delays in delivery times because of supply chain and production issues — something people aren’t talking about quite as much.”

The production of raw construction materials is simply failing to keep up with demand, Beckering said. 

“For the industry to address some of these increasing lead time issues, we’re really going to have to increase production capacity for certain construction materials as an industry because demand has continued to exceed production capacity,” Beckering said. 

For example, Pioneer was just informed by its steel joist and decking supplier that new product orders will not be filled until 2023, Beckering said. Historically it has taken between 10 to 16 weeks for steel products to be delivered, he said. 

“The reality today is that projects are taking longer from concept to completion, and the main bottleneck is the availability of construction materials,” Beckering said. “We have not seen this kind of environment in my professional career. We’ve seen material price escalation, but it’s been with a certain commodity or with a certain trade. Now it’s across the board.”

Pioneer has pre-purchased some construction supplies to accommodate short-term demand, Beckering said. 

New normal

In many cases, developers have been working with their construction and design teams to rework projects with different materials that are more readily available. 

Orion Construction CEO Roger Rehkopf said it’s increasingly common to have continued negotiations with the owners of projects and architects over available materials that will maintain quality standards.

“Even with certain colors of paint you can’t get the pigments to mix different colors,” Rehkopf said. “Things you never used to think of — you used to be able to buy 50 colors of siding and now you might get 12. Right now, the ball to juggle is what can I do to look for another product that will do the same thing with what is available.”

This has been a huge part of Megan Feenstra Wall’s job as of late. Wall, principal at Grand Rapids-based Mathison | Mathison Architects LLC, and her colleagues feel pressure to stay on the same design and construction timelines amid extremely long lead times with most construction materials. 

Projects have had to be redesigned and re-worked because of high materials costs and long lead times, increasing the time architects typically spend on projects in a time of high demand, said Feenstra Wall, who also serves as the president of the American Institute of Architects Grand Rapids

“My firm is busier than ever, and I’ve heard the same from other AIA members,” Feenstra Wall said. “A lot of things are taking more time and input, and it has been extending our involvement in projects months beyond what we anticipated.”

This has produced a mixed bag as projects are either redesigned or cost more, she said.

“We’re looking for ways to keep the scope as it was with the same budget by choosing different materials, which a lot of the time is not possible right now,” Feenstra Wall said. “We have to talk about changing the scope or (the client) spending more money. We’ve done both, and we’ve seen both happen.”

Staying busy

Despite the hurdles, projects are generally remaining in the pipeline or are being temporarily paused. Last year brought a “real concern” that supply chain issues for construction materials and resulting complications would dissuade developers from pursuing projects, but Feenstra Wall said that hasn’t been the case. 

The Architecture Billings Index (ABI) rose one point from August through the end of September to 56.6. The ABI scores over the last eight months have been among the highest ever recorded in the index’s history in immediate post-recession periods. Among American Institute of Architects member firms, backlogs are averaging 6.6 months — the longest it’s been since the Institute started collecting backlog data in 2010.

Feenstra Wall said one downside is a growing sense of burnout among architects with the large workload after pandemic-related stress. 

Still, staying busy is better than the alternative of lacking work, she added. Mathison | Mathison has hired a few more employees to keep up with the high demand. 

“This is forcing us to think about the way we do things and to rethink that,” Feenstra Wall said. “Whether it’s hybrid working or changing the materials and products we’re used to selecting, it’s forcing us to consider other systems and products, which is kind of exciting.”

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