No End In Sight For High-Cost, Delayed Houston Construction
Costs of constructing basic office buildings, from one-story flex buildings to high-rises, rose across the board in 2021, according to a just-released construction cost report from Kirksey Architecture.
An average seven- to 25-story, 25K SF high-rise costs between $124 and $175 per SF, compared to $118 to $167 per SF in 2020, according to the report. Rising costs of concrete mean some contractors are choosing to use composite steel, a lightweight mix of steel and concrete, instead.
For an average low-rise office building, prices are around $100 to $118 per SF, as opposed to $95 to $111 per SF in 2020. Parking structures, almost necessary in Houston, have increased, too, to $38 to $62 per SF from $30 to $55 per SF in 2020. The report says that most mid- or high-rise office buildings have parking structures now, with flex or low-rise buildings usually choosing surface lots.
Most contractors surveyed by Kirksey say they expect prices to continue to rise 3% to 8% during the course of 2022. Scheduling delays, too, are longer than expected, and Kirksey Executive Vice President Randall Walker told Bisnow that common tactics of ordering material as soon as possible no longer mean that a company may receive it on time.
"You've lost the ability to get a jump on it," Walker said.
Last March, the city of Houston changed its storm detention requirements, and contractors are feeling the pinch from the more stringent guidelines, per the report.
Materials like structural steel, bar joists and roof membrane have become particularly difficult to afford and receive. Roofing membrane in particular was affected by the 2021 winter storm in Texas, Walker said. According to the report, nearly half of survey respondents are using or considering mass timber construction as a way of coping with delays and price hikes.
Increased demand for remote or hybrid work may indicate less office activity, but Kirksey says it hasn't identified a definitive trend. Multifamily demand for low-, mid- and high-rise projects is continuing, it says, along with medical and life sciences projects.
There is no immediate sign of change. Walker said, adding that while there's hope for improvement in the industry, the future of construction prices can only be described as uncertain.
At a Houston Bisnow event in late October, panelists lamented that 2021 had seen a 15.5% decrease in construction activity due in large part to higher materials costs and supply chain issues creating building delays.
At that time, experts said steel prices have stabilized somewhat, while delivery times had fallen to 26 weeks after reaching a peak of 32 weeks. Even so, E.E. Reed Construction President Mark Reed said steel prices had gone up 146% over 18 months, based on a recent comparison of a 1M SF industrial project launched last April and a similarly sized one his company priced out late last year. Reed said the price of concrete had gone up 5% since that time, doors and frames by 18%, glass and glazing by 20%, wood plastics by 23%, overhead doors by 36%, and sprinkler pipe by 41%.
“If I ever thought I'd lose a night’s sleep over rollers for overhead doors, I would have thought you're crazy, but that's been the topic of the year,” he said.