Ripple effect. The coronavirus pandemic, climate change and a shortage of workers have resulted in scarcity — and rising prices — for everything from computer chips to cars to pies. Inevitably, the disruption in the global supply chain is beginning to crimp capital projects for co-op and condo boards.
Serious setbacks. Andras Joo, the head of the owner’s rep department at New Bedford Management, ran into just that problem while recently tackling a mandatory facade project at a 60-unit co-op in the Riverdale section of the Bronx. “Once the metal frame was up, they couldn’t get plywood and lumber from anywhere,” Joo says. When an unexpectedly high number of bricks needed to be replaced and change orders began to come in, the project’s cost jumped from an estimated $120,000 to more than $200,000, forcing the board to levy a one-year assessment and increase maintenance this year by 4%. It may also need to draw on its line of credit to cover cost overruns.
Soaring costs. Such struggles are going to become more commonplace across the city, Joo predicts. “We have many projects that had to be postponed,” he says, “and now we’re faced with higher prices and fewer resources. The price of lumber alone is 10 times higher than it was a year ago. We have to renegotiate a lot of contracts. Contractors and architects are overbooked. Contractors’ prices are up to 30% higher this year on some projects.”
Be prepared. How can boards deal with this squeeze? “My advice,” Joo says, “is to start early and plan ahead. Every board that’s planning to do capital projects this year should have already started. Plan the budget with more flexibility, and plan for longer lead times. Hire an owner’s rep and very carefully work out the scope of work, then fix both prices and duration of the contract. Try to nail down costs so the contractor will take on any rising costs.”