Build What Matters with Allison

Making projects pencil in this dynamic market is no easy feat. The current economic climate presents a range of challenges for construction planning and budgeting. As a preconstruction leader, my role is to closely monitor industry trends so I can help clients understand these dynamics and find strategies to keep their projects moving forward.

Higher Material Costs + Risks of Labor Gaps = Increased Spending

Material costs and labor availability remain a moving target. While we saw some stabilization earlier this year, recent and potential tariffs have disrupted material pricing again. Labor costs have risen sharply over the past five years, while the availability of skilled workers has declined. In today’s market, we’re often paying more for less productivity, which translates to extended schedules, higher wages, and increased risk of labor gaps—all of which drive up project costs.

The Domino Effect of High Interest Rates

Interest rates have further complicated things. Compared to the record-low rates of 2020, today’s higher borrowing costs are making it challenging for real estate developers and institutional owners to move forward. Higher rates are charged on a higher construction estimate, making it much more expensive to execute a loan and make a project financially viable. That often leads to additional value engineering efforts, which can lead to project delays and then ultimately an increase in the construction cost due to escalation, tariffs, scheduled start, etc. Some clients are opting to hold their land to wait and see what happens in the market in the future, hoping for a more stable and risk-averse time.

Collaborating Early is Key to Budget Success

When choosing to move forward with a project, early collaboration is more important than ever, and the earlier a preconstruction team can be involved the better. My approach is to sit down with clients and design teams to talk through the goals and vision of the project. Using this information, I can help direct the design team to produce design documents that align with their vision. I often create a target value estimate that displays the budget into categories so architects know how much they can spend in each area to keep the project in budget.

Trade partners play a big role in maintaining a project’s feasibility. I leverage their scope-specific expertise during value engineering to maximize client dollars while preserving the project’s aesthetic. Currently, I recommend onboarding high-dollar trade partners early to mitigate escalation and material procurement issues. It’s important to understand each trade’s productivity in the current climate and closely evaluate material selection to keep cost impacts minimal.

The Benefit of Value Engineering Solutions

Guiding clients to make informed decisions quickly is necessary when a project is faced with scope or budget challenges. When providing options for cost savings, I often provide exhibits or work with the design team to visually show the revised product to the client. Understanding how value engineering solutions work alongside the project’s goals is essential, because the clearer and more precise the information I can provide, the faster decisions can be made. Building trusted relationships with clients makes this process significantly smoother. Open, honest dialogue is critical to aligning budget targets. I also prioritize risk mitigation on controllable items and help develop contingency plans that are clearly defined for preconstruction through project completion.

Ultimately, my role is to make the complex more manageable. While I can’t control global economic trends, I can control how we respond to them through early collaboration, smart planning, and informed recommendations. There are still clear paths to project feasibility—it just takes the right team and a forward-thinking strategy to get there.