Embracing Tech May Be The Best Way To Cut Construction Costs
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Construction costs in Chicago rose 5.35% in Q1, according to Rider Levett Bucknall's North American construction cost report, and that was before fabricators started hiking prices on their materials after the Trump administration announced its 25% steel tariff.
The developers and contractors who spoke at Bisnow's Chicago Construction and Development event at the historic Drake Hotel Wednesday morning indicated they are looking at tech advancements as a way to reduce costs, often before work begins on a site.
WiredScore CEO Arie Barendrecht said more developers and contractors are planning tech additions early in the development stage, versus waiting until a project is well underway. Barendrecht said these “digital master plans” for new developments are cost-saving measures. Developers are being encouraged to embrace this by local governments. The Boston Planning and Development Authority incorporated a broadband planning questionnaire into its design review process — the first U.S. city mandating all developments have a technology plan in place.
Barendrecht said this planning allows developers to truly future-proof a building and treats digital technology in construction as a convergence of sustainability, wellness and technology. Tenants will select space based on all three of these factors, in addition to location and pricing.
W.E. O’Neil President John Russell said if the tariffs ultimately have no effect on costs, it is unlikely metal materials pricing will return to pre-tariff levels.
O’Neil is leveraging 3D modeling as much as possible to maximize its off-site prefab construction. The average cost of construction work in Chicago is nearly $100/hour. Russell said having as much prefab work done in factories as possible reduces on-site man hours.
O’Neil is also investing heavily in laser scanning. Russell said this is especially beneficial for renovating historic buildings. Laser scanning allows the company to create its own as-built renderings of these projects. O’Neil laser scans all of its formwork before pouring concrete so it can document the location of embedded steel, plumbing and electrical work. This allows O’Neil to have a record in case repair work needs to be done.
Property Markets Group principal Noah Gottlieb said his firm is focused on software solutions to its tech needs, because the fast pace of innovation has rendered recent trends like master key entry systems obsolete. Focusing on software solutions allows PMG to push those solutions to its customers as soon as they are available.
Gottlieb said developers are focusing, for the first time, on tenants' needs today and tomorrow. PMG's primary challenge as a long-hold player expanding into other national markets is identifying the sustained competitive advantages the firm has in a specific location. PMG is focusing on data collection to make these decisions and beta test samples across its portfolio.
"If I have data showing a fully furnished apartment is worth more revenue in Chicago, I can apply that to other markets," Gottlieb said.
Next Realty President and CEO Marc Blum said technology is already revolutionizing how buildings are being constructed. Building systems like HVAC, plumbing and electrical are more efficient. Developers are saving costs thanks to lower parking requirements, and developers are building garages with flat floors in anticipation that they can be converted for future use. In an amenity-rich construction environment, Blum sees a day when rooftop decks will be out of favor a decade from now, and the costs savings can be applied to other common amenities.
“The reality is they don’t get used a lot,” Blum said.
CORRECTION, MAY 4, 9 A.M. ET: A previous version of this story misspelled WiredScore CEO Arie Barendrecht's first name. This story has been updated.