Commercial Real Estate, Capital, Insurance, Leasing & Management

Ask the Expert: How has COVID-19 impacted commercial real estate construction projects?

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Nick Sanfilippo discuses how COVID-19 has impacted commercial real estate construction projects

Ask the Expert: How has COVID-19 impacted commercial real estate construction projects?

Although most states have deemed construction an “essential” business, there are four (4) major development unknowns: (1) regulatory approval timeframes, (2) banking, (3) availability of materials, and (4) availability of workers.

Most construction projects that are currently underway and still progressing as scheduled. However, local authorities having jurisdiction are not and that is causing much of the delays. Permitting offices are closed, plan reviewers don’t have remote access abilities, site inspectors are advised to stay at home, etc. Many of these government offices are allowing the use of third-party plan reviewers and inspections. There is a process in getting these services approved with each local authority, but once approved, the overall schedule should be expedited due to shorter permitting periods and same-day site inspections.

The second unknown is the banking industry. They seem to be in a holding pattern to see what happens, which is of course preventing the larger construction project from breaking ground. This has been the single biggest delay to the construction industry. There have been a handful of banking groups that are providing the much-needed relief to keep these projects progressing, but the longer-term viability is certainly of concern.

The final two (2) unknowns are the availability of materials and workers, i.e. the main drivers of construction costs. Most think with this pandemic that construction costs will immediately drop. Prior to this pandemic, the pipelines were robust and plentiful. Those pipelines did not go anywhere and for the most part, are being continuing into construction. However, the long-term effect is unknown. Today, material is still in high demand and there is still a shorter of skilled laborers, i.e. construction costs are will remain high. Trends are showing that Q3 and Q4 of 2020 may tell a different story. Pipelines are not filling at the same pace as they were prior to the pandemic. This should open the availability for skilled laborers allowing construction costs to come off their peak. The biggest unknown is materials, especially materials coming from China and from factories that were closed during the pandemic.

Nick Sanfilippo
Senior Vice President
Franklin Street Project Management
[email protected]
O: 404.649.6277    

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