Hawaii construction costs to rise 4% over the next few years, expert says
Despite fewer jobs in Hawaii's building industry, commercial developers shouldn't anticipate a drop in construction costs anytime soon, according to the latest commercial real estate forum on construction trends.
The cost of labor and building materials in Hawaii is expected to rise 4 percent over the next few years, while construction prices nationally are expected to jump anywhere from 2 percent to 6 percent, despite a slowdown in the housing sector, according to Lance Wilhelm, senior vice president of Kiewit Building Group, who spoke yesterday at a forum sponsored by the National Association of Industrial and Office Properties.
Hawaii's $8 billion construction industry has experienced a major boom over the past five years, but high construction costs have less to do with how busy the market has been and more to do with limited supply due to global demand, he said.
When prices spike, there's a tendency for the public and private sector to wait until the market softens, hoping that contractors will be hungrier so they can get the same project built for less money, he said.
"Even if contractors are hungrier, they're not so hungry that they'll do the work for free," Wilhelm said. "There's not going to be enough capacity to drive prices down."
Global demand for oil and metals such as steel and copper, particularly in China, remains high while supplies continue to be constrained by shipping and manufacturing plant limitations and political instability in countries that provide raw materials, he said.
Ways to mitigate building expenses include engaging contractors early in the design process to allow a developer to have a more realistic grasp of costs early, consider alternative delivery methods such as hiring a single entity to do both design and construction, and pre-purchase building components, including air-conditioning systems, elevators and power generators earlier in the process.