Cost Corner – Hotel and Retail Demand

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by Mike Dwyer, Principal, M&H Cost & Review Group

Construction Outlook Improving?

The design and construction industry seems to have mixed views on the outlook for the remainder of 2012 and 2013. An increase in demand for industrial facilities so far this year, along with sustained demand for hotels and retail projects, factors into what projects to be a modest (5%+/-) rise in spending this year for nonresidential construction projects.

Construction costs through 2012 have increased. Material prices have steadily increased throughout the year, pushing contractor margins (fees) lower to be competitive. With increased technology, such as BIM, there is less likelihood of “gray” areas in construction documents. Contractors who enroll in the BIM program will be able to produce more comprehensive pricing.

Along with improved technology is the increase in productivity. Firms that have been hardest hit by the past downturn in construction have made it through by trimming staff. New hiring is not expected to be very robust in the coming year.

During the plan and cost reviews performed by Merritt & Harris, we use our in-house staff of architects, engineers, and cost experts to assess the project from the owner’s prospective. A keen eye for “what is missing” is tantamount to a thorough budget analysis. A cost/sq. ft. study may give some comfort at the early stages of development, but digging into the details before construction commences, as our review staff does, is more effective.

Lenders and investors generally retain Merritt & Harris, Inc. early in the process. Having the consultant on board to review and lend expertise to the plan and budget evolution can save time and money in the long term.

2012 was a decent year for Merritt & Harris, Inc., and we look forward to working with our clients in 2013 and beyond.

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