Large industrial construction owners cannot combat inflation and rising interest rates alone, and there is little they can do to influence the rising cost of materials directly. Whether those commercial construction costs continue to rise, level off, or fall slightly, construction project owners must look to other operational strategies to offset expenses.

SEEK CUTS ELSEWHERE

While construction project owners may be stuck paying inflated interest rates, they can reduce costs in other project areas. For example, consider working with contractors to adjust labor rates, or find creative ways to reduce material costs. For example, hiring a construction management firm that is handling several projects at once can provide their purchasing power to get you a better materials price.

PREPARE FOR APPRAISAL DISCREPANCIES

One of the key problems arising for construction project owners as inflation rises is a misalignment of appraisal values and construction costs. Appraisals typically rely on historic sale and rent prices—they do not account for increased material costs. Banks only lend a percentage of an appraised value; it’s not hard to imagine a scenario in which the appraisal value is far outpaced by the inflated cost of construction materials. Construction project owners would do well to keep surplus cash on hand, just in case of any over-runs or appraisal shortfalls.

CONSIDER ALTERNATIVE MATERIALS

When the cost of a particular material is too high, alternatives may be necessary. While these other options have experienced their own price hikes, they are less severe than those of more common materials like lumber and steel. Consult with a financial partner with industry insight to learn more about how the current price-points for construction material alternatives can positively impact your balance sheet. If conventional steel and lumber prices push a project overbudget, construction project owners can consider pre-cast and ready-mix concrete, DensGlass, zip-board, and alternative wood species. For wood-framed projects, developers can limit waste by using prefabricated wall panels and framing systems. Such alternatives can also decrease labor costs and expedite the project timeline.

CONTRACT REVISIONS

Construction project owners may also save on commercial construction costs by examining some of the finer terminology laid out in their contracts. Consider stipulations that place limits on material cost increases, grandfathering them into an established price threshold for the length of the contract. Also, look into contracts that establish a guaranteed maximum price.

CONSIDER MODULAR CONSTRUCTION

These innovative methods can relieve some of the cost burdens by streamlining the entire construction process. With modular construction, components are assembled off-site in a controlled environment and then delivered as completed pieces of the whole in the form of temporary or permanent modular construction.

When compared to building from the ground up, this option can afford a less expensive, faster build that’s often easier on the environment. However, be sure to thoroughly review potential building restrictions and transportation issues before pursuing this option.

MAXIMIZE THE BENEFITS OF PRE-CONSTRUCTION

Before the ground is broken, the pre-construction planning phase plays a pivotal role in organizing the project. It is even more critical today than ever that all parties involved work together to:

• Develop a deeper understanding of project-specific goals
• Identify any potential interferences the project could face
• Coordinate specific roles
• Streamline project planning and eventual development
• Determine exact materials needed to avoid waste

Altogether, laying the proverbial groundwork before ever breaking physical ground will maximize waste reduction.

USE SMART TECHNOLOGY TO INCREASE EFFICIENCY ON JOB SITES

As with every other sector, technological advancements have increased efficiency on the construction site. While investing in these advancements can come with frontloaded expenses, the time and money saved down the line should provide a positive return on the investment.

AUGMENTED REALITY

AR technology that creates a digital layer of information and visuals over an existing physical object can prove invaluable on the modern construction site. Workers can look through their mobile devices or tablet to gain additional information on a digital landscape. For instance, a device can quickly impose digital building plans on a plot as if they were physically in front of them giving blueprints a new life. This helps workers follow building plans with the utmost accuracy by providing real-time measurements.