San Diego As predicted, tariffs imposed on steel and aluminum imports from Canada, Mexico and the European Union are bedeviling San Diego contractors and developers.
“I’ve got a situation right now with a client, we accepted a bid on a project downtown six weeks ago and the client hasn’t made a decision to go yet. I’m going to have to go out and rebid the job, recheck the prices,” said Steven Shupp, a senior director for project management with CBRE.
Construction costs have been rising so rapidly, partly because of the tariffs, that some general contractors and subcontractors will guarantee prices for no more than 15 days, Shupp said.
Some have raised prices in anticipation of tariffs taking effect, but Shupp said he expects steel prices to jump an additional 10 percent to 15 percent over the next 60 days, and overall construction costs to rise an additional 5 percent.
He’s not alone.
The Associated General Contractors of America said its analysis of U.S. Labor Department data showed that construction costs accelerated in May — the latest month for which figures were available — and that was before the tariffs took effect.
“Prices jumped at double-digit annual rates for metal, lumber and plywood, and diesel fuel, while ready-mixed concrete, asphalt paving and roofing materials also had unusually large increases,” said Ken Simonson, the association’s chief economist.
“The cost of all goods used in construction rose 8.8 percent from May 2017 to May 2018, the steepest annual increase in nearly seven years,” Simonson said. “Moreover, tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher.”
In San Diego County, building owners who haven’t been in the market for 10 years or so and are just now looking to spruce up their property are getting a severe case of sticker shock, Shupp said.
“They look at me today and say, ‘what’s going on here?”
Looking ahead, Shupp said he expects the construction market to slow a bit toward the end of 2018, heading into 2019.
“There’s a lot of work going on this summer,” Shupp said, but beyond summer, “there’s a sense out there that there’s going to be a slight cooling off of work.”
One sure sign, Shupp said, is that contractors have been inviting him to lunch.
Lunch invitations typically mean that they’ll be looking for work down the line.