Getting your project built during a boom

By DAN McTAGGART
Construction Associates, Inc.

Today's development market is filled with obstacles rapidly rising land costs, environmental mandates, growth management regulations and huge entitlement costs to name a few. The last thing developers and contractors need on top of these is a labor shortage.

However, public projects like stadiums, hospitals and transit, coupled with private sector development of high-rise office, condominium towers, hotels, apartments and multi-story retail, are occupying much of the available construction labor-force as well as other resources needed to get a project built.

There seem to be more tower cranes in Seattle and Bellevue than on-street parking spots.

In the suburban markets, increasing rents and record low vacancy rates are fueling retail, office, warehouse and industrial projects. All around the region, development and construction are booming which is straining the labor force beyond its limits. Even smaller cities, towns and counties offer little relief as the available labor force is already being used.

Some developers include the general contractor in site acquisition to get site development costs. Those estimates allow developers to negotiate lease rates with tenants based on a clear idea of the costs they will need to cover.

One answer is to get the project team on board in the preliminary stages of the development and use all of its expertise to plan, budget and schedule the job. Site acquisition is a great time to include architects, engineers, surveyors and general contractors.

Developers for Rite Aid drug stores and HomeBase stores often include us as general contractor in the site acquisition efforts so we can give them site development costs. Those, combined with our historical costs on prototype buildings, allows the developer to negotiate lease rates with tenants based on a clear idea of the costs they will need to cover.

Rite Aid stores provide us with a very preliminary site plan or flash plan to establish the site and building costs that go into the project pro forma. These pro formas become the basis for the economic performance of the project. They are reviewed by Rite Aid and are either accepted or rejected.

The Everett HomeBase store site required a substantial import of dirt and rock to bring the site up to street elevation. The typical cost for this site fill made the project too expensive, but our involvement early in the process allowed us to obtain the material we needed at a price that enabled the project to go forward.

The scarcity and cost of building sites have caused developers to either venture further out into fringe markets or consider sites that they wouldn't have considered five years ago due to environmental, topographic or pricing conditions. As Ed Hogan said at the recent CB Richard Ellis forecast breakfast, The remaining sites in the Southend are hip deep in water and are shaped like Italy. Difficult sites require inventive solutions that are best created by all members of a project team.

For example, on a large retail development site there are some sensitive environmental issues, difficult site grading and geo-technical conditions, and traffic/public right-of-way impacts.

To date, the development team has reviewed the civil engineering design to analyze finished floor elevations and their impact on retaining walls, storm water detention structures, grading and re-use of on-site materials and tenant visibility. In addition, the environmental components require analysis of the downstream impact of the site water discharge, both during and upon completion of construction.

We have found that using a kiln dust or cementatious additive to solidify on-site native material can change the pH level of any water that is discharged from the site. To solve this and ensure that water leaving the site has particulate and pH levels acceptable to all of the agencies and municipalities, takes coordination between engineers, consultants and the contractor. Without this level of commitment from the team, developments like this project cannot even start.

Two problems faced by many developers are moisture-sensitive soils and our relatively short building season. Using native soils on a site to balance the cut and fill or back fill is a major budget consideration. If the material is moisture sensitive it cant be handled in wet weather which means we end up doing site work in August.

Because of these site work limitations, we encourage developers to apply for site and grading permits separately from the building permit. In some municipalities, if you apply for them as a package, you cant separate them later and projects can be delayed a year or more if they miss the weather window for site work.

Early participation by subcontractors is also essential in order to get project budgets and schedules nailed down. Participation by the major trades in scheduling and budgeting will help give the project current cost feedback required to make design decisions. A competitive bidding and pricing situation can be maintained through the selection of these subcontractors and an early commitment to them gets the project on their production schedule while committing them to the labor requirements and pricing.

Bringing in subcontractors from Eastern Washington or out of state has provided some relief on the production or schedule portion of current jobs, but it often comes with a cost premium. Our success using labor from another geographic market has been through the relationships we have formed working with them in their own cities and counties.

Building materials are also at issue. They often need to be ordered early in the development process. Steel roof truss packages for warehouses and some retail projects need to be ordered well before a job starts in order to keep the project on schedule. Although the red iron is available, fabricators are as busy as every one else and need to be scheduled well in advance.

Real estate forecasts predict a mild slowdown in development activity, however, there are so many long-term projects, public as well as private, starting in the next 12 months that our current situation will be with us for the next couple of years.

The construction development team approach will bring to light the difficulties unique to each project and provide solutions and schedules for permitting, construction starts and final delivery.

---

djc home | top | special issues index