Material pricing increases continue to be offset by lingering recession-level pricing lows. Lack of manufacturing labor slows the fabrication of goods. Schedule and budget sensitive projects remain at high risk in the short term.
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As a reeling commercial office market picks itself off the ground, a nasty slew of shortages and logistical nightmares create barriers for vendors looking to keep up with an uptick in demand. The dramatic shift in consumer behavior caused by COVID-19, coupled with labor shortages in the manufacturing and shipping sectors have created unreliable supply chains for essential building materials.
Much like the feelings brought on by the pandemic, the basic questions of “what’s affected” and “for how long” are fluid.
“WE ARE BEARING THE RISK OF MATERIAL VOLATILITY TO KEEP STAFF BUSY, BUT AS THE MARKET BOUNCES BACK, AND WE ARE NO LONGER IN SURVIVAL MODE, WE WILL BE PASSING THIS THROUGH IN PRICING INCREASES JUST LIKE OUR SUPPLIERS.”
Office tenants who are preparing for any kind of real estate change, whether it’s a turnkey deal, new construction space, or adaptive reuse, will see the effects of this issue.
Razer thin margins caused by the recession continue to offset the cost of these material increases. However, as the market rebounds, bottom line pricing will inevitably increase as well.
Schedule increases are shown in number of weeks increased over standard lead times, factoring additional time to find material suppliers with availability. Cost increase percentages are on a material-only basis, factoring raw material costs, availability costs, and shipping costs.
+2 Weeks +60% Cost
+2 Weeks +100% Cost
+2 Weeks +10% Cost
+2 Weeks +10% Cost
+8 Weeks +10% Cost
+2 Weeks +50% Cost
+0 Weeks +10% Cost
+4 Weeks +15% Cost
+6 Weeks +15% Cost
+4 Weeks +10% Cost
+4 Weeks +15% Cost
+4 Weeks +20% Cost
+3 Weeks +75% Cost
+1 Weeks +50% Cost
+1 Week +120% Cost
+0 Weeks +15% Cost
+8 Weeks +30% Cost
+10 Weeks +15% Cost
+0 Weeks +15% Cost
+0 Weeks +10% Cost
+2 Weeks +60% Cost
+4 Weeks +0% Cost
+4 Weeks +0% Cost
+0 Weeks +100% Cost
+2 Weeks +0% Cost
+6 Weeks +0% Cost
+0 Weeks +20% Cost
+0 Weeks +100% Cost
+0 Weeks +10% Cost
+3 Weeks +0% Cost
+2 Weeks +10% Cost
+2 Weeks +5% Cost
+6 Weeks +10% Cost
Strategies that are good for schedule, are often times bad for pricing. Create a tailored plan as soon as possible to better manage costs and risks. Prioritizing release of material and planning for pricing escalations are key.
Request pricing updates at critical milestones and time intervals to establish a pulse on your project’s pricing.
Request the specification of locally manufactured products from architects & engineers.
Expedite the review and approval of contracts & submittals to receive ship date confirmations as early as possible
Create early release packages for your projects for troublesome trades (HVAC, Electrical, Appliances, Drywall, ect.)
Have a temporary installation plan ready for troublesome materials.
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