Colorado-Real-Estate-Journal_316364

28 / BUILDING DIALOGUE / December 2022 ELEMENTS Construction Staying Cool in a Hot Market: Control Construction Costs T he challenges and opportuni- ties the Colorado real estate market faced the last couple of years are likely to continue for the foreseeable future. Developers, own- ers, contractors and designers across the state all face significant head- winds, from labor shortages to rising material costs. However, the construc- tion market also remains strong, with new project starts nearing pre-pan- demic levels. How developers and owners navigate these risks will be the deciding factor in whether they succeed or fail under these conditions. The University of Colorado’s Colorado Business Eco- nomic Outlook from the Leeds Business Research Divi- sion for 2022 showed signs of a strong post-pandemic recovery in the state’s construction activity, led by resi- dential construction. This growth in residential projects (both single-family and multifamily) will predictably lead to a downstream surge in institutional and infra- structure projects. The Investment in Infrastructure and Jobs Act will begin to reach state and local agencies by the end of this year, and the CBEO expects transit, aviation, and highway and bridge construction to grow in 2023 and beyond. The IIJA, obviously, provides the Colorado De- partment of Transportation, Denver’s Regional Transpor- tation District and Denver International Airport, among other public owners, with a generational opportunity to bring their facilities up to a state of good repair, execute capital programs and accelerate key projects. The common denominators for all Colorado construc- tion are material price inflation and limited labor avail- ability. To date, contractors and suppliers have found workarounds to avoid passing on increases, but owners can expect to see costs rise in the months, and perhaps years, ahead. But, owners and developers do have ways to stay prof- itable in such a hot market. Whether relying on in-house professionals or soliciting an outside project/construc- tion management consultant for help, Colorado build- ers looking to maximize their growth while minimizing their risk should consider: • Updating your project information management system: Granular attention to project schedules, costs, resource management, key performance indicators, and reporting and communications will help to realize cost confidence and keep stakeholders on board. For one-off projects, in-house systems may only need updating and streamlining. For multiproject construction programs (such as a mixed-used development), a customized PIMS solution may be a better choice. • Creating an in-house project management office: A PMO offers owners a set of principles and processes to guide and improve project management in a cohesive and holistic manner. The PMO helps verify projects meet the goals of the organization by using standards, pro- cedures, accountability, efficient allocation of resourc- es and management tools that support continuous im- provement across an owner’s entire portfolio. • Implementing alternate delivery methods: For so- phisticated owners who understand risk allocation and have a clear project vision, alternative delivery methods, such as progressive design-build or construction-manag- er-at-risk methods can keep costs under control without compromising quality or design goals. For owners who are unfamiliar or uncomfortable with these delivery methods, a management consultant can help in under- standing how each method might benefit your specific project. Construction is booming in Colorado and shows no signs of slowing. Although interest rate hikes and other constraints will tamp growth, the fundamental demand for more housing, more schools and hospitals, and more public infrastructure is likely to continue. Owners can expect their costs to rise, but they do have options to control these costs and deliver their projects profitably. The three steps mentioned above are relatively afford- able, easy-to-implement ways owners can stay ahead of their costs. Project and construction management pro- viders can also offer other, more in-depth tools and tech- niques to help both private and public owners make the most of Colorado’s construction market. \\ jpvillamizar@hillintl.com Building 48, which is currently under construction in Littleton, is a General Services Administration conversion of this 150,000-sf World War II munitions plant into a sustainable, efficient, modern work environment for the Department of the Interior’s Interior Business Center. J.P. Villamizar Senior Vice President, Western Region, and Denver Of ce Leader, Hill International Inc.