City Grill

John Stebbins 
Managing Director
PROCON

Stebbins says added liquidity in the market, “starting with policies during the last administration,” has increased materials, labor and real estate prices. “On one hand, the cost of construction is higher, but on the other, the value of the finished buildings is higher,” he says. “The underwriting of projects is difficult because the historic value of real estate does not support rising construction costs.  In many cases, it takes a leap of faith by developers and lenders to trust that a project’s future value will sufficiently overtake current costs.”  

Pricing will become “less volatile over the coming year as supply chains and labor shortages normalize,” he says. The Delta variant “is certainly something we should be concerned about, but the shock value of the virus is gone, and we have a better understanding of  how to contain its spread.” 

Stebbins says while there might be a “return to some of the precautions we saw last year, we don’t see the industry shutting down like it did in spring 2020. We are also lucky to be in a part of the country with high levels of immunization so its effect should be blunted.”