Construction costs are rising. From their lowest around mid-2010, we saw increases of around 10-13 per cent to the end of 2014.<\/p>\n
This growth is expected to continue this year, at around 3 per cent in the North West, with similar forecasts until the end of 2019. So what does this mean for the industry?<\/p>\n
The prime driver is the lack of supply in the market. Skilled labour has always been the industry\u2019s biggest constraint with wage growth in construction outstripping the general market.<\/p>\n
While construction input cost growth has moderated after two years of very strong growth, that moderation is not reflected in the growth of tender prices. Contractors are increasing their margins.<\/p>\n
We are seeing less returned tenders and more refusals, with an unwillingness to tender in the first place unless there is a 50:50 chance of the project going ahead. With a more restricted pool and a price that is not market tested to the degree that was possible in previous years, how do they know they are getting the best value?<\/p>\n
Insolvency is also continuing at all levels of the market, which means added risk for a project and ultimately less contractors in the market, creating a supply chain risk for the contractor.<\/p>\n
Developers will look at three factors during a project \u2013 time, cost and quality. It\u2019s difficult to focus on cost when costs growth is just a fact of life, and no developer would want to compromise on quality, so what\u2019s left is time.<\/p>\n
If costs are rising, the quicker a project starts the better. So how do you fast track your procurement?<\/p>\n
It\u2019s often sensible to carry out early works with smaller contractors or friends ahead of finalising requirements and getting the main contract to site.<\/p>\n
Alternatively, some may choose to go two stage and task a main contractor with carrying out early works while helping to finalise requirements \u2013 getting the contractor and supply chain involved early.<\/p>\n
Lastly, utilising a good construction manager (CM) is also coming back into favour \u2013 the CM will only receive his fee so has no interest in growing the project.<\/p>\n","protected":false},"excerpt":{"rendered":"
With construction costs rising, what does the future look like for the industry?<\/p>\n","protected":false},"author":100,"featured_media":7975,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","format":"standard","meta":{"_acf_changed":false,"_joinchat":[],"footnotes":""},"categories":[12339],"tags":[11813,9771,11807,11814],"class_list":{"0":"post-4978","1":"articles","2":"type-articles","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-starting-a-business","8":"tag-construction-costs","9":"tag-insolvency","10":"tag-procurement","11":"tag-tender"},"acf":[],"yoast_head":"\n