Developers Look To Shorten Construction Time To Bring Costs Down
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Cranes dot Boston from Fenway to the Financial District, but the developers behind all the construction stress it is time, not tariffs, keeping costs high.
“To keep a competitive advantage in this market, you can’t be parochial,” Suffolk Northeast President and General Manager Angus Leary said Tuesday at Bisnow’s Boston Construction and Development event. “The big thing is saving time. In a union market like we’re in, time becomes so important because labor drives so much of the cost.”
While panelists at prior Bisnow events have labeled Boston the most parochial construction market in the U.S., developers and construction executives Tuesday said it is an unfair characterization. Boston’s soaring construction costs mean its developers must look to innovative ways to build, or else it becomes impossible to sustain the region’s ongoing building boom.
“Boston is a thought leader in construction. [Venture capital firm] Borealis Ventures is tracking 70 startup companies in the real estate and tech industries,” Arrowstreet principal David Bois said. “That’s not something you find everywhere. If you look at Boston’s reaction to climate and sea level rise, it’s anything but narrow-minded.”
The cost to build in Boston has gotten extraordinarily high. The Hamilton Co. Chairman and CEO Harold Brown said multifamily construction costs have gone from $20K to $450K per unit in the city since he started his company in 1954.
Developers and construction firms are utilizing upfront planning to cut time off projects. Washington, D.C.-based shopping center developer and operator Edens uses Procore software to manage projects and keep all workers in the loop and on the same page for a project like its 700K SF mixed-use project at South Bay.
Upfront planning is vital to ensuring everyone along the construction value chain from start to end understands exactly where they want to be, Leary said.
“The most successful projects we’ve had are the ones where we’ve convinced an owner and architect to bring in the contractors, trade partners and general contractors early,” Leary said. “There’s a level of trust going back to that familial feeling of working with each other. It’s not just digitally doing it on paper. It’s making sure the people in the field that are actually putting the work in truly understand the sequence.”
Time is not the only threat to construction costs. President Donald Trump announced in early March he intended to levy a 25% tariff on imported steel, which has led to speculation that already soaring construction prices could go even higher. But Leary pointed to prior tariffs that have already worked themselves into the industry as to why he is not as concerned by a threat of rising materials cost as he was several years ago.
“Before the last downturn, we had this huge spike in steel because China bought up about 50% of the world’s scrap, and it sent the steel market through the roof,” Leary said. “You couldn’t lock in a steel price for more than 24 hours. We haven’t seen that in eight or nine years.”
Quick construction is not a new concept. Samuels & Associates is underway with the $150M first phase at 401 Park, formerly known as the Landmark Center. The revised plan for 401 Park includes a new 14-story, 506K SF office and lab building, updates to the existing building’s over 950K SF of office and labs and 300K SF of retail, including a Time Out Market.
Heading into construction, the developer noted the enormous existing structure, originally built for Sears in 1928, only took 11 months to design, permit and build.
“We have to look a little back at our productivity levels and see some inspiration from the past,” Samuels & Associates Senior Vice President of Development Abe Menzin said.
Productivity is on the rise, and Cannistraro President John Cannistraro said the same construction crews are increasingly doing more work. Construction handoffs are typically where time is lost on a project, which Leary attributed to different entities like drywallers and electricians having differing staffing levels. By closely monitoring production, contractors can close the handoff gap and cut time on a project.
“If you look at the time frames of how we’re building buildings in Boston, it’s reduced drastically from where it was,” Leary said. “There is 12 to 13% less union on the bench than we had prior to the recession, and we’ve had no labor issues. There have been tight spots, but no labor issues. We’re keeping up with demand by being faster and more efficient.”
But closing handoff gaps require more than communication from within a construction team. It also entails more teamwork between a construction firm and the developer behind a project.
“On the development side, we’re focused on what we build,” Menzin said. “Construction guys are focused on how we build, and I think together we’re going to make a lot of progress over the next few years.”