Current trends in New York City indicate that the construction market is facing a variety of challenges related to cost, ranging from supply chain logistics, and price escalations. However, the greatest impacts noted impact schedule, primarily due to material delivery durations and lead times increasing by more than double.
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Project Insights
Lehrer Cumming is advising Owners to focus on negotiating unit rate pricing from suppliers to avoid further cost escalation, and pre-purchase long lead items to avoid impacts to project schedules.
| Cost Drivers | Cost Impact | |
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Design + Construction Manager FeesFierce competition to secure marquee projects has resulted in financial bids that can widely vary, and in many instances, offer more favorable fees and terms to Owners. However, on $1Bn+ projects, pool of design and construction firms with the proven ability to deliver megaprojects remains small, and owners are selecting firms with the deepest relevant experience, keeping fees consistent. |
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InsuranceOCIP rates are at 6.5-7% with contractors holding 2% in contingency. CCIP rates are consistent at 8-9%, which is normal, but continue to rise. |
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Material EscalationsMajor steel fabricators are uncertain as to when prices will normalize with increases of up to 25-50% this past year. While lumber for cabinets, metal stud framing, and copper experienced prior spikes, pricing continues to normalize. On Lehrer Cumming projects, advanced bulk purchase programs have been implemented to mitigate the cost uncertainty. |
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LaborProjects are no longer experiencing labor shortages and productivity issues due to COVID. As quality and safety in non-union trades improve in New York City, clients are shifting to a mix of union and non-union labor. Clients that have shifted are presently achieving trade cost savings of 10% to 15%, and are managing through the complications of an open shop project. |
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Challenges with ImportingChina is facing container shortages due to other essential goods taking priority, and LC is advising owners to evaluate the cost risks and schedule merit of a shift to domestic materials, as domestic materials enable faster delivery times (at a higher price point). Proactive procurement planning continues to be necessary with uncertain supply chain logistics. |
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Material Lead TimesManufacturing that normally would take weeks is now taking months. For example, steel, doors, frames, and computer chips are experiencing significantly longer durations. Factories that ramped-down or shut-down during COVID are now having difficulty meeting current demand levels. |
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PermitsNational Grid, FAA, ConEd, and FDNY are experiencing longer lead times as compared to pre-COVID durations. FDNY drawing submission review lead times have increased by 6 weeks and inspection lead times by 3 weeks. |
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New York City Market View
We expect supply chains to improve by the end of 2021, but not fast enough to offset current delays and shortages.
Top 3 Price Escalation Increases
Escalation Rate Forecast2
Material Duration Changes (months)
