Project Starts in 2021 Surge But Material Shortages Force Delays
The $90-million St. Mark’s Hospital Patient Tower addition and hospital renovation in Salt Lake City, led by Layton Construction, adds 125,000 sq ft of space to the facility, with an additional 42,000 sq ft of renovations.
Image courtesy of Layton Construction
Early last year, many of the region’s contracting firms were concerned about ongoing pandemic-related delays and their impact on project starts. However, many of those concerns abated late in the year, and now firms are reporting that 2021 starts met or exceeded their expectations and that current backlogs are strong.
“Project starts for 2021 were up slightly from 2020, with a majority of starts taking place in Q3-Q4 as client confidence and availability of lending began to return to the market,” says Scott Bustos, general manager of Turner Construction’s Colorado office. Turner’s regional backlog now exceeds pre-pandemic levels, he says.
Daniel Feagans, vice president, Brinkmann Constructors, says his firm’s starts “have more than doubled since 2020 … and the market is ripe for new developments.”
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This year, availability of work and project awards are not the issue for most firms. Instead, construction leaders are vexed by supply chain disruptions and a surge in the cost of construction materials, which make preconstruction and procurement even more difficult.
So far, those increases have not dampened project starts, which rose 9% nationwide in February, according to Dodge Construction Network. Nonresidential building starts were up 32%, residential starts fell 3% and nonbuilding starts were down less than 1%. Year-to-date, total construction was 14% higher in the first two months of 2022 than in the same period of 2021, Dodge says.
But that doesn’t mean all those new projects can start right away. “There is now a four- to eight-month lag between being awarded a project and commencing work due to sourcing long lead materials before we mobilize,” says Slade Opheikens, president, R&O Construction.
The increasing cost of materials also means that “construction budgets no longer pencil within the overall client proforma,” Bustos says.
The increases have prompted firms “to create strategic partnerships with our subcontractors and suppliers to get ahead of procurement,” says Mark Beal, vice president of construction operations in the Rocky Mountain region for Ryan Cos.
Meanwhile, the increasing prices also mean that “owner budgets previously forecasted below current market conditions,” says Wayne O’Brien, COO at Garney Construction. That, in turn, has forced agencies to seek additional funding from other sources, including the federal government, he says.
