Higher Construction Costs Affecting LA Development
Parts of LA, particularly DTLA, are experiencing a construction boom, but rising construction costs continue to pose challenges to getting all of those projects done.
Fairfield Residential Co. Senior Vice President Larry Scott said construction costs are at the forefront of a lot of developers' concerns, including when it comes to multifamily.
Scott said the labor pool for subcontractors shrunk fairly substantially during the most recent recession.
"Most of the major subcontractors have been hesitant to staff up to the levels that they were prior to the recession and probably rightfully so," Scott said. "So there are fewer subcontractors that are qualified for large projects, and then they're having more and more difficulty finding skilled tradesmen."
The labor strain has resulted in his firm's costs going up substantially over the last four or five years and impacted schedules, making projects fall behind up to six months in some cases, Scott said.
There are similar challenges from rising construction costs in the office market, where tastes have changed.
When it comes to office, tenants have certain things in mind they prefer, namely creative office, according to Rising Realty Partners Vice President of Construction Steve Achorn.
"Among our tenants, we are seeing more interest in clean, open spaces with multiple small and large conference rooms with high, exposed ceilings using high-end materials," Achorn said. "While we do still see the traditional, private office space build-outs, we don't have nearly as many as we used to."
Tenants also want easily accessible amenities, including fitness centers and spaces to work or hang out outside of the office.
The former Title Insurance and Trust Building will be turned into creative offices and has been rebranded The Trust Building by Rising Realty. It is the largest restoration project on Spring Street and is tentatively expected to be completed next summer.
Hear more from Achorn and Scott at Bisnow's LA Construction & Development event Aug. 29.