Construction has traditionally been a leading indicator and a driver for the U.S. economy. On the indicator front, construction has often tailed off before an economic downturn. As a stimulator, construction has historically generated six dollars of activity for every dollar spent on a project.
The economic reality coming out of the COVID-19 pandemic is that there will be a significant impact on the pricing and availability of materials. Cooperative and condominium boards and property managers will face challenges based on the shortage of materials and the potential scarcity of labor on the horizon.
Cost control in construction is critical to cooperative and condominium boards and property managers. Residential cooperative and condominium buildings often use timing to manage costs, such as delaying a capital project to allow prices to drop or stabilize. That may work for some projects, like boiler and valve replacements. However, in the case of the Façade Inspection Safety Program (previously Local Law 11), there are strict deadlines for performing façade safety work.
Residential cooperative and condominium buildings will have to adopt new strategies to manage capital maintenance and construction costs. This requires an understanding of the recent developments in supply chain and how to compensate for this by advanced project scheduling.
The hard reality is that, between the Trump tariffs and the impacts of COVID-19 on manufacturing, worldwide construction materials are less available and more expensive. For example, lumber prices have increased 300% since the beginning of the pandemic. Drywall prices are expected to increase 30% in the short term. The price of electric cable is also escalating rapidly. Projects must be planned more carefully to manage this issue, including factoring in the time for the delivery of materials and ordering only what is absolutely necessary. Materials must arrive in time to allow the work to continue without interruption. This requires ordering materials earlier and more precisely.
Materials cost and availability are not the only issues. A labor shortage is developing. There are likely many factors causing the labor shortage. People, including construction workers, have been leaving big cities. Working construction in masks and other PPE has made the job harder physically. Construction workers did contract COVID-19, and some may have long-haul symptoms. COVID-19 may have encouraged Baby Boomer construction workers to retire, and these workers are not being replaced by millennials.
There are labor-saving improvements, such as 5G, that may make construction work more efficient with fewer workers. For example, remote operation of cranes, trucks and other remote access equipment is on the way. In addition, construction materials are changing and improving. Techniques are also evolving. These changes appear to be reducing the labor on projects.
In face of these changes, residential cooperative and condominium buildings and their property managers are going to have to demand and receive realistic manpower, equipment and material-loaded schedules. These schedules will have to show approval, order and deliver dates for materials. Equipment that is required, such as cranes, sidewalk sheds and lifts, needs to be scheduled precisely, and the schedule needs to show the permitting process. Manpower must be identified closely so that workers are efficient; managers are watching productivity. Although construction workers are not happy with artificial 6425520 intelligence cameras monitoring their activities, these may be necessary to ensure that the workforce is productive. Property managers and boards should expect to pay up to $7,500 for these services, which will be needed through the entire project. However, given the various constraints, this cost will probably be offset by savings.
This column presents a general discussion. This column is not intended to provide legal advice. Please consult your attorney for specific legal advice.
Carol A. Sigmond
Greenspoon Marder
590 Madison Avenue, Suite 1800
New York, NY 10022
carol.sigmond@gmlaw.com
212-524-5000
