As More Construction Looms Material Costs Creep Up
Written by Patricia Hoyos on October 13, 2011
By Patricia Hoyos
The cost of construction materials has started to creep up while labor costs remain low, experts say, as prospective projects in South Florida begin to emerge.
"There are a few more things in the pipeline," said John Harrison Jr., president of Harrison Construction Corp., "but the market, it’s still very flat."
Demand is the biggest determining factor when it comes to construction material and labor costs. If demand is rising, it’s at an almost unnoticeable rate, Mr. Harrison said. Until demand begins to rise considerably again, he said, any growth in the industry will remain minimal.
The construction industry is still very far off its peak, said Jon Fels, president of Brookman-Fels and incoming president of the Builders Association of South Florida.
"The only thing we are encouraged by is that there are more inquiries in respect of what people are planning for future projects," he said.
Very few houses and condominiums are being built, Mr. Fels said, but the amount of work has increased.
Demand is also unlikely to rise for the construction of new commercial space, said Truly Burton, executive vice president and government affairs director for the Builders Association of South Florida, because there’s still a lot of empty commercial space to rent.
Prices of some materials like concrete and polyvinyl chloride pipes (PVC pipes), a pipe widely used in construction, are increasing, she said, probably because they are closely tied to the price of oil. Other materials like lumber, she said, have seen prices decrease.
According to the Engineering News-Record, the prices for PVC pipes rebounded for the third consecutive month and are 2.6% above last year’s level. Cement prices are also up, being 2.1% higher than last year.
The price of lumber fell 0.9% this month, putting prices 1.1% below what they were same time last year, according to the report.
Mr. Fels said the reason concrete prices have risen may be that the price of oil was very high earlier in the year.
Luis Garcia, founder and president of Adonel Concrete, a South Florida privately-owned concrete company, has an alternative explanation.
He said that, despite low demand, his suppliers of cement and other resources needed to make concrete have started to sell materials at higher prices even if it means sacrificing the volume they sell.
"They’ve been selling the material to us at a breakeven point or a loss hoping that the market will turn around six months from now," he said. "It’s been four years."
Suppliers of construction materials realized that it’s more profitable to raise prices and sell less, he said. Consequently, Adonel Concrete has begun to do the same with its concrete, he said, raising prices but selling less.
"We are in the same situation," Mr. Garcia said. "Everything echoes in the industry."
Labor costs, on the other hand, have remained low because of the low demand, experts agree.
Still, according to statistics from the US Department of Labor, unemployment in the construction sector for the month of September fell nationwide from 17.2% last year to 13.3% this year.
In August, the most current data available, 31,600 persons in Miami-Dade worked in construction, according to the US Bureau of Labor Statistics. In August 2010 the figure was 31,900, but in August 2007, during the boom, 56,000 persons in the county were employed in construction.
Labor is a reflection of the amount of work that’s available, Mr. Fels said. As the economy worsened, demand for labor and wages both came down, he said.
The industry has improved, he added, but it hasn’t recovered.
"It’s certainly noticeable yet not dramatic," he said. "Wages have improved, but everybody is being asked to do more for less."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.