Through the Roof

Cost-Saving Strategies

Rather than scaling back or canceling projects, some builders trim construction budgets by using lower-cost materials and tweaking building specifications. “An exterior originally designed to be 80 or 100 percent brick might be turned into 60 percent brick, with the remainder a more inexpensive stucco-type mix or even pre-cast material,” Molda says. While not typically viewed as an aesthetic equal to brick, the mix—known as exterior insulation finish system—is sometimes seen as an acceptable tradeoff given its lower cost. In other cases, a revised plan might use more exterior stone or metal panels rather than glass to reduce costs. Architects, too, might be asked to spend less on light fixtures and other interior design elements.

Parsons Electric now uses more aluminum wire instead of copper for things such as electrical switch gears—a change it says does little to affect performance. “We often can save a lot if we go to compact aluminum conductors rather than copper on some jobs,” Nielsen says.

Contractors of all stripes have become shrewder in their bidding and material-purchasing strategies. In the good old days, suppliers might quote prices that were good for 60 days or more, but in today’s volatile climate, quotes are often week-to-week or even day-to-day.

To beat price increases, contractors are purchasing more product, where possible, further in advance of need. “We’re always trying to identify materials that it makes sense to reserve or buy early,” Knight says. “There are some materials that building owners can prepurchase as long as they’re confident the design won’t change much.”

Customers Bear the Brunt

While developers, contractors, and business owners absorbed some of these increases as prices began to rise, it was only a matter of time before end users started feeling the pinch. Businesses that rent space in new commercial buildings, for example, will likely see higher rents. And those footing the bill for new construction will find themselves paying per-square-foot development costs that are markedly higher than in previous years.