Through the Roof

Prices have been climbing due to the trifecta of increased demand overseas for supplies, higher petroleum prices, and the effects of Hurricane Katrina, which created material shortages because of vast reconstruction needs and destroyed key resin-production and cement plants. (Resin is used in coatings and other building-material components.) In addition, higher crude oil prices have led to increased costs for transporting materials and driven up the price of petroleum-based products, such as PVC piping and vinyl siding.

Two years ago, the cost of some steel products increased 100 percent, local contractors say, and the price has recently stabilized near that higher level. The cost of cement rose 5 percent in early 2006 alone, Molda says—an addition of about $5 per cubic yard. The price of copper wire jumped from $1.45 to $4.00 per pound in the past year, says Jamie Allen, purchasing manager at Parsons Electric. “Copper has been fluctuating so much that if you get a quote in the morning, you need to check to see that it hasn’t changed by the end of the day,” he says.

Barry Olson, purchasing manager at Hunt Electric in St. Paul, says the cost of PVC piping, which electricians use for wire conduits, has more than doubled in the past year. In early 2005, Olson paid 96 cents per foot for four-inch PVC and by the first quarter of 2006 was paying $2.23 per foot.

In the wall and ceiling arena, Panek says the average piece of four-by-eight-foot sheetrock has gone up more than $3 in a year. “This is the most I’ve paid for sheetrock or steel in the 21 years I have owned the company,” he says.

New Realities

These escalating costs are often a shock to CEOs or directors considering constructing new buildings or renovating existing facilities. “Those who haven’t been in the construction market for a while are usually surprised by the costs contractors bring them,” Molda says.

While there are few signs that the sticker shock has caused business owners or developers to cancel projects, particularly in the still-surging health care and residential-condominium construction markets, rising costs are forcing builders to look harder at ways to trim budgets that in many cases have expanded far beyond original projections.