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Spring Planning

Article written by Jack Carr, P.E., R.S., LEED AP, Criterium Engineers
 
It is winter in Maine and you are feeling good about yourself for being in a condo and having someone else do the shoveling. Though it may be difficult to think of spring while you are sitting by the open fireplace and tuning up your skis, it may be just the thing to do.
 
Perhaps you are on the Board and someone dusted off the reserve fund study which reminded all the Board members that the wood siding replacement project was overdue. Or maybe at the last meeting a few unit owners were talking about the continuous leaking from the recent rash of ice dam problems with the roofs.
 
Spring is traditionally the time to start new construction or repair projects to take advantage of favorable weather conditions. This has always meant planning in advance to lock in the best contractors and arrange the financing. This year there may even be more reasons to start early planning.
 
Maine is not much different than the rest of the country when it comes to the slowdown in the residential real estate market. When houses are not being sold, they usually are not being built either. This means the residential and multi-family construction market is down.
 
When this occurs, construction material inventories start accumulating at the local lumber yards, general contractors are scrambling for work, and labor rates start to drop. In addition, construction material production ramped up in the recent past to meet the needs of storm related damage from America’s hurricane-ravaged gulf coast and Indonesia’s tsunami-stricken areas.
 
It creates a buyers market. This spring might be a good time to find a contractor who is willing to sharpen his estimating pencil. It might mean your condo project might get multiple bids with very competitive pricing. It might mean the tradesmen skill level will be higher as the labor force is not being stretched as it has in the recent past.
 
Will these conditions last? Probably not. Up here in Maine we sometimes feel we are tucked away in a corner of the country where the rest of the world’s issues have little or no impact on us. Of course this could not be further from the truth. The reality is that the world is flat and globalization is here to stay.
 
Perhaps at the moment, materials seem plentiful at the local Home Depot but that can change in a heart beat. While our residential construction market may be slow, many areas of the world are competing for these same materials. China is building eleven new cities the size of Houston. China is currently using half the world’s supply of cement, 30% of the world’s steel, 25% of the world’s copper, and 20% of the world’s aluminum.
 
These statistics will have a real impact in the near future and this does not even take into account energy and oil related issues caused by China and India’s accelerating consumption plans driving the price of oil to over $90 per barrel. Most of Maine’s building materials travel on trucks.  Even now independent truck drivers are having difficulty in keeping their rigs on the road.
 
The price of oil not only affects fuel and transportation costs but the manufacture of building materials including the recent annual price increases of paving and roofing asphalt (up 71%), copper (up 81%), concrete and steel (up 14%), and plastics (up 19%). Metals such as nickel, tin, and zinc used for stainless and galvanized steel and other alloys have been affected by labor strikes and political unrest in mining countries like Chile, Mexico, and the Democratic Republic of Congo.
 
Recently, the chief economist of the Associated General Contractors of America, Ken Simonson, stated, “Price spikes are likely to be chronic for many construction materials, and to occur with little warning.” Labor prices may rise later in the year due to the competition from the commercial construction industry which has not seen a downturn in its market. Labor rates of up to 6% increases may be experienced in many trades with specialized trades such as crane and ironworkers seeing increases of 10 to 12% by the end of 2008.
 
The point is, this might not be a good time to put that long overdue project off even more. Perhaps it would be a good time to update your major repair plans. This might be a very good time to meet with your property manager or reserve fund professional and take a serious look at taking advantage of these current market conditions. They will not last.
 

© CRITERIUM ENGINEERS 2007