Bingham Construction: Fuel, Tariffs, and Project Pricing

First, the bad news.  Subcontractors are passing along fuel cost increases from the ongoing Iran war, tariffs on miscellaneous steel products are being passed on by manufacturers and third party distributors to subcontractors, shipping and freight costs have gone up due to spikes in diesel fuel, affecting all levels of supply chains.

Now, the good news.  Due to the ongoing lull in commercial real estate activity over the past 6 to 8 months, subcontractor pricing is not necessarily increasing due to above factors, and has in many cases decreased, as they struggle to maintain backlog to keep their employees working.  Backlog is an ongoing issue across the board for GC’s, architects, and brokers.

Due to continued geopolitical uncertainty, now is the time to start construction projects while pricing is still relatively low.  We’re seeing many clients push back job starts only to experience cost increases due to the material and fuel cost volatility mentioned above once they’ve decided to move forward, and typically a few months after initial pricing was submitted.

In addition, we’re confident some good news is headed toward the CRE industry by means of the ultimate resolution of the Iran war, which may significantly reduce fuel prices, the lowering of interest rates by the federal reserve, and the typical increase of backlog afforded by projects and tenant activity during the summer.

That’s why preliminary budgeting, design, procurement, and subcontractor input matter more than ever.  We can help project owners and stakeholders identify the most cost-effective approach to their project even if the prevailing strategy is to sit back and wait.  Please feel free to reach out to us today to learn more.