Though Many Shy Away Tumbling Building Costs Favor New Projects
Written by Yudislaidy Fernandez on March 25, 2010
By Yudislaidy Fernandez
Uncertainty in the real estate market has many shying away from new projects, but for those with the capital this could be the best time to build.
Lower material and labor costs can translate to big savings for developers and builders ready to start because the construction slowdown has stiffened price competition.
Another noticeable trend is how the gap is closing between sustainable construction versus regular construction costs, industry professionals say.
Building costs are closer to what they were about 10 years ago, said Luis Garcia, president of Doral-headquartered Adonel Concrete. Concrete prices alone have fallen about 30% from the market’s peak.
"If somebody has the cash, this is the time to build," he said. Someone looking to build a dream home can do so now, he said, which would have been almost impossible five years ago.
The local construction labor force has decreased steadily for two years, US Bureau of Labor Statistics figures show.
Total construction employees in Miami-Dade stood at 52,700 in January 2008 and fell to 43,100 by that December, according to bureau statistics. From January to December last year, construction employment dropped from 39,800 to 34,400.
With fewer construction projects ongoing, Mr. Garcia said, companies vying for the contracts are cutting prices.
Well-capitalized builders are waiting on the sidelines for the market to stabilize more to move forward with projects, he says, and take advantage of lower building costs.
An example is homebuilder Lennar Corp., he noted, a client of his which is now selling homes built for less during the market downturn on land bought at discounted prices in areas such as Homestead.
But builders looking to benefit from lower-priced construction materials and reduced contractor fees shouldn’t wait much longer, Mr. Garcia says.
"The prices are rock bottom right now," he said. "It’s not going to get any cheaper than this."
Overall, Mr. Garcia says the construction business is already looking better than last year.
For example, Adonel was hired by Baker Concrete Construction and MCO Construction, the Marlins stadium project’s shell contractors, to supply 8,000 yards of concrete for the ballpark’s ground slabs.
Sustainable building is also becoming less costly, with more construction-industry professionals certified in eco-friendly building codes and better-quality green products available.
Engineer Luis A. Betalleluz, president of Miami-based engineering firm BetaJones Group, says the market knowledge in Leadership in Energy and Environmental Design, a green building certification program also known as LEED, has increased over recent years with more accredited professionals.
"I’ve seen the growth has been tremendous since 2002," when he earned his LEED accreditation, he said.
At that time, the local market had few green building experts and most were architects, he said. Today, a variety of professionals are seeking LEED accreditation, such as real estate agents and attorneys.
Also, "there are many more people in the development role who understand LEED," said Mr. Betalleluz, chair of the Builders Association of South Florida’s green building committee.
Through more research and testing in recent years, the fine-tuning of sustainable products and materials has made them more efficient and affordable, said Mr. Betalleluz, who said he has worked on about eight large-scale green projects.
For example, he cited permeable asphalt, a pavement system that allows water to seep through the surface, as an improved material. When it first came onto the market it needed a lot of maintenance, he said, but an improved product now costs less and lasts longer.
With these advances and lower construction costs, he said, green projects that before cost 20% to 30% more to build can be engineered now for the same price or 5% to 10% more.
With the construction industry still slow, it’s hard to know what the future holds for sustainable building, but some industry professionals say it’s here to stay.
Several South Florida cities, including Miami, Homestead, Cutler Bay and Hollywood, have tweaked building codes to add sustainable building requirements.
Truly Burton, government affairs director of the Builders Association of South Florida, says more and more, green is becoming the standard of building, especially with more third-party certified green building codes.
Aside from LEED, which has been leading the way, builders can also follow guidelines set by the Florida Green Building Coalition and the National Association of Home Builders’ National Green Building Program, she says, all offering more options.
The builders association has been lobbying local governments to adopt all these codes and not just one, Ms. Burton said, to give builders more alternatives.
LEED is the leader and really does well in commercial buildings, she explains, while the Florida Green Building Coalition’s code offers state-friendly amendments for residential and commercial developments. And the homebuilders’ Green Building Program is really specific for the residential market, offering guidelines for all phases from land development to construction and maintenance. This code also gives homeowners a handbook, she noted, with instructions on how to maintain the structure throughout its lifetime.
Some cities offer incentives for going green.
For example, Hollywood established mandatory green building practices for new construction and major renovations, she said, but builders and property owners get to choose from four to five options to meet green standards.
Conversely, she says, the City of Miami has "proposed punishment into Miami 21 requiring a large bond if a project owner does not meet LEED certification," she said. "I don’t think the city really thought it through."