Just when you thought it was safe to go back into the waters of new facility construction, along came another report of runaway costs and order delays for building materials.

Ron Starner, executive director of IAMC

The McGraw-Hill Construction Outlook 2006 report notes that "rising construction expenses" could "diminish developer enthusiasm." Grubb & Ellis estimates that construction costs across the U.S. will increase by 10 percent this year. The Associated General Contractors of America adds that prices for certain building materials are in such constant flux that quotes may remain firm for less than 30 days.

On top of all that, the National Association of Home Builders predicted recently that the price of building materials of all kinds would rise sharply in 2006.

Site Selection, the official publication of IAMC, recently interviewed several IAMC members and found that virtually all member firms are experiencing construction cost hikes and project quote delays (see related article in March 2006 issue of Site Selection).

IAMC member George Livingston, chairman of NAI Realvest Partners in Maitland, Fla., noted that industrial rents were climbing in response to building material shortages and rising construction costs. "Companies have been slow to add new space until recently," he said. "Now they have to face up to higher costs to construct, longer time to build, scarce land, higher land costs, increasing occupancy levels and higher rents. Operating costs will go up, too, due to fuel costs.

"They are between a rock and a hard place," Livingston noted. "They need space as their growth demands it, but they cannot or do not want to play. The advantage now is to the developer and landlord."

Robin Spratlin, general manager of economic development for Atlanta-based Georgia Power, says the rising costs issue could force companies to do more searches for existing buildings. "We have not seen that change yet, but the impact might be felt and seen early next year," she said.

What is certain, however, is that it now costs a lot more to build an industrial facility than it did at this same time last year. Building material prices have risen most sharply in the past 12 months in Baltimore (up 16.4 percent), Birmingham (up 12.0 percent), St. Louis (up 10.6 percent), Philadelphia (up 10.3 percent) and Atlanta (up 10.2 percent), according to the ENR Construction Cost Index.

What’s needed is a creative plan of action — a course of effective facility planning and cost containment — and that’s exactly the type of information you will find at the IAMC Spring 2006 Professional Forum in San Diego.

More than 300 people have already registered for this event, the eighth Forum in the history of IAMC. If you want to learn the best strategies for coping in these changing times, you should come too.