Concerned about escalating construction costs and unpredictability of future costs, the developer in November halted work on Merchants Row, the first mixed-use complex of the $1.6-billion Quincy Center redevelopment project that broke ground five months ago in Quincy, Mass. The project, eight miles south of Boston, will now go into redesign to save money, according to Street-Works, the Quincy developer.

Construction of Merchants Row—a public-private partnership with the City of Quincy and one of the largest redevelopment projects in Massachusetts—was planned in conjunction with the new Adams Green public space that will encompass the graves of American Presidents John Adams and John Quincy Adams and their wives, and link to the Massachusetts Bay Transportation Authority Red Line station in downtown Quincy.

“The escalation is the result of a very over-heated Boston construction situation with escalation in every area—financing, materials, and particularly labor,” says Richard Heapes, cofounder of Quincy developer Street-Works in an email.  

In Street-Works’ role as designated master redeveloper for the Quincy downtown, it has selected Twining Properties, a Manhattan-based real estate firm, to handle the primary development decisions on the Merchants Row block, including the redesign plan. Heapes was unable to provide additional information on the redesign work. Shesky Architects, Quincy, the designer for phase-one work, declined to answer questions regarding the project, and Twinings was not accepting calls at the number listed on its website.

Construction prices have escalated about 12% nationally over the past 12 months, but in Boston they are up 37% and expected to increase an additional 10% to 14% next year. Consequently, Merchants Row was projected to rise from its initial estimate of $130 million to $170 million, Heapes says. “There is obviously a regional construction price spike occurring right now while rents in Boston and in Quincy are already at a peak with no significant rise expected in the near future,” he says.

Chris Walker, director of policy and information for Quincy Mayor Thomas Koch, says: “There are always hiccups when working through a project of this magnitude, but the mayor is still optimistic the project will move forward. With regional construction costs rising, no one was greatly shocked [by this development].” 

But Heapes says, “We do not know when or if these explorations will lead to a reduction in costs significant enough to resume construction.”

Concerns about cost prompted a change in plans in September. The change in construction strategy included downsizing the planned 15-story high-rise into a six-story structure both to lower construction costs and to provide access to a broader number of subcontractors, Heapes says.

Street-Works is now embarking on a complete project re-evaluation, Heapes says. That includes consideration of low-rise construction design, program changes in the mix of residential space and retail and office space, and financial arrangements with equity and debt providers as well as the public sector. The developer will also consider construction alternatives including prefabrication and lower-cost materials and labor arrangements, he says. 

The city of Quincy expects to have a timeline for the project by February, Walker says. “There are lots of moving parts with the redesign, cost issues and the permitting process required by the city.”

In January, Mayor Koch announced that Street-Works, working with LaSalle Investment Management, Chicago, had secured more than $55 million in equity financing for Merchants Row, allowing the public project to move forward. The current plan includes a new 20-square block urban mixed-use neighborhood comprising several office towers and 700,000 sq ft of retail.