Monday, April 06, 2009

Dallas-Fort Worth builders getting a break on construction costs

The recession and sharp slowdown in construction has at least one silver lining: Builders who are still starting everything from houses to high-rises are getting a break on construction costs.

When Ron Davis started working on his latest home in Dallas' M Streets, he was pleased to find that costs that were lower than he expected.

That's quite a switch from a couple of years ago.

"Back then, they were raising prices every time you turned around" for construction materials, labor and land, Davis said. "Now there are a lot less homes being built. You are able to get price breaks here and there."

Dallas housing analyst Ted Wilson of Residential Strategies Inc. said that there are savings in most materials and labor costs. "Lumber is down, as are steel and petroleum-based products. Most prices are down 5 percent to 10 percent."

Concrete and roofing products are a couple of exceptions, with prices rising or holding up, Wilson said. Lumber futures prices have fallen more than 30 percent since last year. And copper prices are down by more than 50 percent.

For builders, the windfall is welcome.

Developer Granite Properties recently took a look at costs for an office building it's planning on State Highway 190.

"We had already priced the building in the summer of 2008," said Granite's Greg Fuller. "We repriced it for a prospective tenant, and it was now 13 to 15 percent less."


Granite also found that its high-rise 17 Seventeen McKinney office project in Uptown will cost less than originally budgeted.

While many of the costs were locked in, Fuller said, "we will save another 15 percent or so on the tenant space finish cost on that project."

Some price tags have fallen even further.

Dallas architect HKS Inc. has a new project at Texas Woman's University on Inwood Road in Dallas that will cost more than $34 million. Last year, the design firm priced the eight-story, multiuse building at about $220 per square foot.

"We ended up with costs in the $160 range," HKS associate principal Rex Carpenter said. "Now they are hoping to build a garage with the savings."

In recent years, Carpenter said, HKS did projects where the costs were constantly escalating. "It was changing so quickly we could never keep up with the upward curve."

Low for now

Cirrus Group found that the cost of its new North Dallas medical building dropped significantly in just a few months.

The company just received a $16.8 million loan to build the Reliant Rehabilitation Hospital on Northaven Road west of North Central Expressway.

"We priced in December of last year and then again in March of this year," Cirrus' Greg Francis said. "We recognized savings across the board, but most notably in steel and copper."

Falling construction prices may prompt some builders to hold back on groundbreakings in anticipation of cheaper costs, he said.

"The downward movement in construction pricing has certainly been a welcome change, with the only downside being that it encourages attempted market timing," Francis said. "Some of our clients have adopted a wait-and-see approach, not only due to market conditions, but also because they think they'll be able to lock in construction pricing at the bottom of the market."

Meanwhile, they can take additional capital markets risks, he said.

And most builders anticipate that the decline in prices is temporary.

"I think the prices right now are soft, but after the first of next year we'll see an acceleration of costs," said Davis, who is building a 3,600-square-foot house on Ridgedale Avenue that he hopes to sell for more than $700,000.

"All the manufacturers have held off on price increases because of the softness of the building market."

The Dallas Morning News