Construction Costs COVID-19
How is everyone underwriting construction costs right now?
Is anyone anticipating any short term discounts based on demand, or would this not be discounted based on the impacts to the supply chain?
For what it's worth, we are a day or two away from going to GMP on apartment deal and hard costs have come in 3%-4% below expectations. GCs have been taking lower margins and subs are being pinched because I think both realize their pipelines will dry up in 12-18 months. Materials really not that different.
Also, sub availability is a lot better. We can be choosier with who does what work whereas before we'd just have to take the one or two bids we got.
Dear Construction Costs:
Please go down. We’re tired of paying for our subcontractors’ new boat.
Love,
Developers
There will absolutely be reductions in hard costs. The question is whether than happens now, or in 4-5 months.
Right now, we are seeing 2-3% for limited pre-GMP work which is not totally representative of the full cycle of trades and materials that make up a full project.
We've had conversations with senior guys at Lennar, Mill Creek, Wood Partners, Pollack Shores, and Hines in the past couple of days, and general consensus seems to be the numbers aren't coming down significantly just yet because everyone is repricing projects and subs are busy churning out new numbers. However, I would guess only 10% of those projects are "real" in the sense that they have financing lined up and are actually in a position to start. That is why we think the real cost softening is not going to happen for another 45-60 days when subs realize the pool of real customers is much narrower than they think.
Chuckles at "Rangewater"
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