The State of the Industry

Like so many things in our society, the construction industry here in Florida is in a very challenging place right now.

There are currently many factors contributing to this:

1. Inflation – Everything is more expensive now than it was 2 years ago. After a long time of 1-3% inflation, we have experienced 2 years of double-digit inflation. All of these inflated material costs become the base
calculation for contractors and subcontractors to bid jobs out.

2. Labor Costs – There are two components to this. First, as government regulation concerning minimum wage increase, these expenses get passed on to the consumer. Second, the labor market is exceptionally
tight right now, meaning difficult physical labor jobs have to pay even more to attract employees away from comfortable air-conditioned environments.

3. Demand – Depending on your source, up to 500,000-1,000,000 people have moved to Florida in the last 12 months. While we would expect these people would soften the job market, we have not seen that yet.
What we have seen is a huge increase for demand in housing along with an increase for demand in commercial properties. These things are being built everywhere you look. All of the people involved in this industry are “As busy as they want to be”. This puts everyone involved in the construction process - architects, engineers, designers, contractors, subcontractors, etc., in the position of being able to name their price.

4. Government Involvement – Again, two separate components to this: First, this is not a political comment on any level, but increasing government regulation is certainly driving the costs of construction and remodeling projects up. Requirements related to energy efficiency, air conditioning, access, and insurance add significantly to expenses. The second impact from the regulation side is related to timeline more than money, but we all know that a project delayed is also a more expensive project. As so many construction projects are currently underway, the government agencies responsible for approving and inspecting and permitting these projects are just plain overwhelmed. Projects that used to take 6 weeks to
get permitted are now taking 3-4 months.

All of these things, and others not mentioned, combine to make managing people, budgets and timelines critically more important today than it was 24 months ago.

The last 3 proposals I have put together for clients, I have used the number $320/square foot for new construction strategic planning. Only 18 months ago I was (accurately!) using the number $265. I have had potential clients get upset with me when they see these numbers, go and do their own research, then come back to me when they realized my numbers were accurate.

A quick warning for everyone: If you have someone in your life, or in your circle of relationships, you are consulting with while considering a construction or remodel project…if that person has not built anything, in your market, in the last 24 months, PLEASE bring someone else with current experience into your planning team. I have seen too many projects get the greenlight with inaccurate information in the last 12
months than in the 8 years before that.