Soaring fuel prices and the mounting cost of building materials are taking their toll on the construction industry.
Developers, architects and contractors are rethinking, among other things, whether a project goes forward, how the parking will be handled and where they procure their materials.
“We are changing approaches to lessen the use of the most volatile construction materials in our designs,” said architect Brad Buchanan, principal of Buchanan Yonushewski Group.
The producer price index for materials used in all types of construction, plus items such as diesel consumed by contractors, leaped 10.4 percent over the past 12 months, the largest year-over-year increase in 20 years. The index for highway and street construction soared 18.9 percent.
“All of this is in the face of a downturn in the real-estate market, which has held leasing prices and sales prices fairly flat in the last 24 months,” Buchanan said. “The bottom line goes away.”
Skyrocketing fuel costs are making operating excavation and shoring equipment so expensive that below-grade parking is becoming cost-prohibitive for many projects.
“We’re seeing projects struggling with how to handle parking,” Buchanan said. “It puts pressure on folks to do more above-grade parking.”
Plans for the Residence Inn’s parking were changed to be above-grade.
“The only reason that could work is because there was adjacent ground available,” Buchanan said. “That’s what made that project a reality.”
The first thing Terry Drahota plans to do for his project at the University of Wyoming College of Law is order the steel. Over the past 12 months, steel prices have increased at least 40 percent.
“They’re only guaranteeing pricing for one week,” said Drahota, president and chief executive of Drahota Cos., which has offices in Fort Collins and Steamboat Springs. “We have to guarantee our prices to the owners for a minimum of 30 days.”
The mounting cost of construction materials also has caused the delay or cancellation of several projects. Drahota said he was ready to start work on a bank in Sterling, but the client put the project on hold. He declined to name the bank.
Gypsum makers have told contractors that wallboard prices will increase at double-digit rates in each of the next three months. Aluminium has been setting records, and natural gas has doubled in price from a year ago, triggering increases in the cost of construction plastics such as polyvinyl chloride pipe, insulation and flooring.
“It’s brutal,” said Ken Simonson, chief economist for the Associated General Contractors of America. “The most extreme reports are about asphalt — the price has doubled in the last six months.”
The downturn in the residential market has caused a flattening of wood prices, but it’s being offset by the high cost of fuel.
“Deliveries of lumber are affected by fuel prices,” said Brad Schenck, vice president of preconstruction estimating at JE Dunn’s Denver office. “Everything requires trucking.”
That has many builders and developers looking closer to home for materials.
“It puts economic pressure on designers, builders and developers to take more seriously the concept of sourcing materials from local vendors,” Buchanan said. “That’s a good thing. It’s just good economic sense.”
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
