hawaii construction market update...published a quarterly construction cost report that has provided...
TRANSCRIPT
PRESENTED BY RIDER LEVETT BUCKNALLQ1 2021
HAWAII CONSTRUCTION MARKET UPDATE
1. Speaker Introductions & RLB in Hawaii
2. RLB Cost Analysis
3. Construction Market Outlook
4. Recommendations for the Road Ahead
5. Q&A and Discussion
AGENDA
TEAM INTRODUCTIONS
ERIN KIRIHARASenior Vice PresidentDirector - Hawaii Region
GUIA LASQUETEAssociate PrincipalNeighbor Islands
BRONSON PAIAssociatePreconstruction Lead
BLAIR BANKERSenior Claims ManagerAdvisory Services
T: +1 808 391 4500E: [email protected]
T: +1 808 489 7014E: [email protected]
T: +1 808 883 3379E: [email protected]
CASSIE IDEHARAPrincipalCost Consultancy Lead
T: +1 808 220 8118E: [email protected]
T: +1 808 983 9831E: [email protected]
HONOLULU
KIHEI
WAIKOLAHILO
APPROX. VALUE OF PROJECTS AWARDED IN THE LAST YEAR
$3.5B
HAWAII-BASEDEMPLOYEES
50+ESTABLISHEDIN HAWAII
1991HAWAII OFFICES
4
RLB IN HAWAII
RLB IN HAWAII
Tracking construction costs in Honolulu since 2002.
COST CHANGES IN 2020
HONOLULU YoY % COST CHANGE IN 2020
JANUARY APRIL JULY OCTOBER
4.53% 2.82% 1.04%6.12%
Q1 2021CONSTRUCTION COST INDEX
1.22% Construction Cost Increase from Q4 2020
Q1 2021 | CONSTRUCTION COST DRIVERS COMMODITY PRICING
Material Approx. Increase from Q4 2020
Structural Steel 26%
Rebar 20%
LumberSince early 2020 40%
Shipping CostsContinental U.S. 60%
Shipping CostsLAX HI 70%
ECONOMIC INDICATORS
ABIARCHITECTURAL BILLINGS INDEX
GDPGROSS DOMESTIC PRODUCT
A score above 50 indicates an increase
National figures published by U.S. Bureau of Economic Analysis
COST INDEX RLB independent figure tracking for Honolulu
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
-40.0%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
US REAL GDP | RLB'S HONOLULU COST INDEX | ABI
US GDP Honolulu Cost Index ABI
ECONOMIC INDICATORS 2008 – PRESENT
-
5,000
10,000
15,000
20,000
25,000
30,000
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
RLB
CO
ST IN
DEX
(HAW
AII)
ESC
ALAT
ION
% C
HAN
GE
FRO
M P
REV
IOU
S Q
UAR
TER
OVERALL CONSTRUCTION COST INDEX, ESCALATION, AND TRENDS
QCR Quarterly % Change Honolulu Cost Index Construction Cycle Trend
COVID-19 IMPACTCOST COMPARISON
C-19 IMPACT
CONSTRUCTION OUTLOOKMARKET ACTIVITY
17%
16%
17%
Projected Trends
NEAR TERM
After a correction period, we expect escalation to resume at a normal rate
Projects are currently bidding and large planned projects are restarting / back on the table
Smaller and medium-size construction firms starting to normalize as construction demand increases
More State and Federal projects anticipated with additional funding, especially with COVID-19 relief bill
CONSTRUCTION OUTLOOKMARKET ACTIVITY
17%
16%
17%
Projected Trends
LONGER TERM
2022 – correction period may drive spike in annualized escalation rate
2023 – even more pent-up demand may stretchlocal labor pool shared across the islands & Pacific
There will be an eventual boom
2014 saw approx. 14% aggregate escalation
Consideration of political influence on economy, i.e. tariffs
$2 Trillion American Jobs Plan
Neighbor Islands
CONSTRUCTION OUTLOOKMARKET ACTIVITY
No measurable decline in bid pricing
Travel restrictions
Contractor backlog, bid pricing & escalation
Recent bid market activity
Recommendations for the Road Ahead
17%
16%
17%
Recommendations
Develop clearly defined organizational, scope and communication protocol
Assist the Owner/Developer with “filling all gaps” for services
THE ROAD AHEAD
Risk
Project Responsibility Organization
Recommendations
Renewed focus on Division 01 and Supplemental Conditions for COVID 19 schedule and cost impacts of safety, delay, and material procurement provisions
THE ROAD AHEAD
Risk
Project Manual
17%
16%
17%
Recommendations
Advise your client or design team on any known difficulties with material supply chain issues and cost increases
Request procurement schedule from GC early in the process
Earlier-than-typical engagement of interior designer
Limit proprietary product specifications
THE ROAD AHEAD
Risk
Product Selection
17%
16%
17%
Recommendations
Change Orders:
Do not accept “TBD” in schedule extension field
Do not accept exculpatory language for future cost associated with pandemic
Force majeure provisions for delay ineffective as basis of claim due to failure of the “unforeseeable” criteria
Value Engineering – proceed with caution
THE ROAD AHEAD
Risk
Contract Administration
“Anything you say, or more importantly write, can be held against you in a court of law”
17%
16%
17%
Summary Hawaii has likely experienced the extent of de-escalation in
construction pricing due to COVID-19.
Material supply disruptions may impact project cost and schedule.
A return of previously suspended projects and new demand for construction is driving the construction economic recovery quicker than initially forecasted.
CONSTRUCTION OUTLOOKMARKET ACTIVITY
REFERENCED PUBLICATIONS
Quarterly Cost Report
For nearly 20 years, RLB has published a quarterly construction cost report that has provided its clients with a 360º view of the current state of the industry. RLB continues to evaluate our clients’ future through holistically analyzing present conditions, redrawn priorities, and potential opportunities as we move forward from impacts of the COVID-19 pandemic.
Access the Q1 2021 Quarterly Cost Report for North America here.
COVID-19: Global Survey
Our rolling global survey provides a snapshot of the developing impact of COVID-19 on the built environment. It also includes viewpoints from colleagues around the world on how their markets are evolving in response to the ongoing global pandemic.
Access the latest release of the report here.
RLB Intelligence App
The RLB Intelligence provides the latest location-specific cost data from information gathered from RLB's global network.
REFERENCED PUBLICATIONS
Architecture Billings Index (ABI)
The Architecture Billings Index is an economic indicator for nonresidential construction activity, with a lead time of approximately 9–12 months.
Investment groups like Wells Fargo, media outlets, firms of all sizes, and business leaders rely on this leading monthly economic indicator to assess business conditions and predict and track the market.
Review the latest ABI releases here.
U.S. Bureau of Economic Analysis |Gross Domestic Product
The U.S. Bureau of Economic Analysis is your source of accurate and objective data about the nation's economy.
A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation's overall economic health.
Access current and historic data here.
KIHEI300 OHUKAI ROAD, BUILDING BKIHEI, HAWAII 96753+1 808 875 1945
WAIKOLOAQUEENS’ MARKET PLACE69-201 WAIKOLOA BEACH DRIVESUITE 2F12WAIKOLOA, HAWAII 96738PHONE: +1 808 554 8849
HILO820 PIILANI STREET, SUITE 202HILO, HAWAII 96720+1 808 934 7953
HONOLULUAMERICAN SAVINGS BANK TOWER1001 BISHOP STREET, SUITE 2690HONOLULU, HAWAII 96813+1 808 521 2641
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