By Judy Goldman, CEO of Front Range Design Center
In this stressful and confusing period in our lives with nothing to compare it to, it’s hard enough just to understand the stay at home orders. So, what does it mean for you, who’s project is currently ready for or under construction? Why aren’t things moving forward if the construction industry is considered “essential”?
The answer is quite complicated. I’ll break it down between residential and commercial.
For the residential homeowner – if you choose, your contractor can work on your project, provided that your family and the construction crew keep a safe distance apart. That’s the easy part. Here’s where it gets complicated:
· The material/products the construction team is installing has to come from somewhere made by other teams from companies all over the world. Even the wood in your framing has to be logged, milled, trucked, inventoried, sold, transported and installed. So goes the same for all the other products.
· Countertops such as granite and marbles must be quarried, shipped to retail outlets or wholesalers who then inventory, transported, billed to fabricators who in turn have to template on-site, fabricate (cut and finish at their location) transport, install, bill…and so it goes.
· Flooring, tile, and fabrics all take people in the factories, dying facilities, mills, weaving facilities, and plants who must work closely together to accomplish their goal – to deliver product to your sources. Not all of these companies are considered “essential” and even if they are, many of their states have required lockdown.
If that isn’t enough, there is still the cities’ involvement in many of your projects if you require a permit…the cities are grappling with closed inspection offices and closed permitting offices. Talk about people working closely together. These offices are usually small and have many people very near one another.
· Many towns and cities are trying to find a way to do “virtual” inspections for things like plumbing and electrical or not do any at all.
· Going to apply for a permit on a new project has all but stopped in many areas and it is uncertain when this all will be back online.
For the commercial projects – the scenario is much the same concerning supply chains, product availability.
· New construction is easier because the contractor is typically in control of the construction site and can manage those that are authorized to come and go.
· TI or tenant improvement in a leased multi-use, commercial building where work is being done in only part of the space possesses an altogether more complicated scenario.
The building owners or property managers may not want anyone in the building or only during off-hours even if there is a “stay at home” order in the city. This limits access to the worksite in unexpected ways. Perhaps a truckload of tile or flooring is scheduled for delivery, but the property manager will not grant access.
The sequencing of a job is ultimately what the builder negotiates daily. This task is hard enough as it is and to try and navigate the changing environments and people’s responses to it, makes it twice as time-consuming.
These are only a few examples of the direct impact we “feel” but can’t quite figure out why exactly we aren’t seeing what we expect.
Then there is the other side to this COVID-19 pandemic; what is it doing to each of our financial positions. The undercurrent and driver of the economy is our collective spending. Whether you are a homeowner with a bathroom remodel or a developer with a multi-building project, we are all recalibrating our spending habits.
· As a homeowner, you are watching the gyrations in the market and that personally hits your savings, 401k, the resale value of your home and most importantly, assuming you haven’t been fired, laid off, furloughed, your liquidity. The project you anticipated starting next month is pushed off until we feel stability in whatever forms that make take.
· As a developer, the calculation of your ROI changes. Your project is now spread out over an extended period of time, resources that once worked for you are no longer with you. Workers are remote and keeping things moving forward looks very different today. Lending and liquidity markets have shifted. Even though money is cheaper, trying to tap into that is more time consuming than it used to be.
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