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The Ugly Side of a Hot Construction Market

This morning, at Bisnow's 3rd Annual Construction & Development Summit at the Intercontinental, experts agreed not everything is perfect in paradise. Our hot construction market is tempered by high construction costs and a low labor pool. (No diving.)

Construction costs have surged in the past three years, says Swinerton Builders VP Steve Johnson, and he expects to see a 5% to 10% increase in the next 12 to 18 months. As more development occurs—he counts well over 30 tower cranes in downtown S.F.—it's harder to find the craft needed for fast-paced projects. Swinerton has invested heavily in tech to price work as design progresses. He was just in Seattle researching new technologies to improve productivity. 

ROSSI Builders prez Craig Rossi isn't affected by the shortage of labor because his projects are typically fast-hitting deals. His TI projects start with a deadline, when the tenant needs to be out of an existing location. He's never missed a deadline because of not enough bodies on the job, which takes communication and coordination. He thinks S.F.'s tech industry is in better shape than it was in 2000, when no companies were making money. From what he can tell, social media companies got out a little ahead and are correcting those mistakes now. (Ironic, since most social media mistakes haunt you on the Internet forever.)

Ropers Majeski Kohn & Bentley PC partner Matthew Zumstein moderated. To increase qualified labor in the short term, panelists told him that developers are getting construction teams on board earlier. Matthew asked what materials have increased the most year over year; concrete takes a few spikes based on how much work is going on.

Environmental Building Strategies principal Matt Macko is walking its talk and will soon occupy a net-zero energy, LEED Version 4 Platinum building (at 945 Front, where DPR will also call home). There's still a barrier of entry for larger buildings to go net-zero (the tallest is six stories in Seattle), yet advances in high performance design and technology are gradually lowering those barriers. The industry needs to realize buildings don't use energy—people do. (To control energy, we need to control people, he says.) A simple solution is Nest, which combines game-changing hardware with software and makes the idea of turning down a thermostat easy.

RN Field Construction prez John Grcina drove into the city at 5am on a recent Saturday and saw eight active concrete pours between Harrison and Mission and Main and Second. That's one of the most amazing things he's seen in his 30 years in this town. The combo of commercial and residential is bringing more vitality to the city. He's keeping an eye on Title 24 building standards and thinks new buildings like Salesforce Tower and 181 Fremont will easily comply with new requirements, but older buildings will run into problems. (If we wanted to see older things not comply with rules, we'd take our grandma to a buffet.)