Rising costs crimp some construction projects while others flourish

Rising construction costs have prevented Butler County residents from getting some new amenities such as restaurants, even while construction of mega-projects appears to be flourishing.

Fairfield Twp. had hoped to get a new Quaker Steak restaurant near the Menards home improvement store. Earlier this month, however, the man overseeing the project, Jim Combs, said an unexpectedly high price tag put it on the back burner indefinitely. The construction costs came in a half-million dollars over projections, he explained, and the economics simply didnt work.

At the same time, within less of a mile from each other, the $160 million expansion of Cincinnati Childrens hospital is under way, along with the construction of the Liberty Center, the $350 million mega-retail complex, even while contending with rising costs. The total cost of investment of Liberty Center increased from $300 million.

As we enter the third quarter of 2014, trends indicate that the marketplace is changing and construction prices are heading up. One strong indicator of this increase were seeing is the number of projects that are coming in over clients desired budget, said Kevin Cozart, vice president of the Messer Construction Company.

A report by the firm Building Design and Construction states that as of late last year, construction costs had increased for 22 consecutive months. Driving that increase were labor costs, amid concerns about the availability of skilled workers. The Turner Construction Company publishes a building cost index. That index has seen a 4.24 percent increase from a year ago.

Cozart said published costs are primarily based on material costs and labor rates, but they do not take into account subcontractor overhead and profit, which had sunk as low as five percent during the recession.

For the companies that survived the recession, there is finally an adequate flow of work. The overall economic situation has improved to the point that projects delayed or shelved during the recession are back online. Increased business activity is generating the need for additional space, Cozart said.

There are signs in some areas that the local market is picking up. Tim Bachman, the director of development for the city of Fairfield, said he has seen a rebound lately due to market demand.

Ive heard that several years ago, people were acquiring empty buildings because of the cost of construction and because they were cheap, he said. Now, those buildings, at least in Fairfield, are pretty absorbed by the market, so we are seeing people kicking tires on new construction.

However, smaller projects like restaurants might be canceled or modified, while large projects that have been in the planning for many years manage to stay on track, said Bachman.

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Rising costs crimp some construction projects while others flourish