Picking Up After Irma: The Challenges to Rebuilding in the Current Construction Climate

Article written by Lidia Dinkova on Daily Business Review

The challenges after Hurricane Irma abound: Downed trees, power outages — and a competitive construction climate awaiting South Floridians rebuilding or repairing their homes and businesses.

"Everybody is in competition if you are in the construction industry right now. The competition for labor and materials had already started and predated these storms," said Conrad Lazo, construction attorney and shareholder at Becker & Poliakoff in Tampa, referring to the tolls taken by Hurricanes Harvey, Irma and Maria.

The burden would be on labor and materials, and supplies of both had tightened in recent months, he said. A departure from construction jobs because of the Great Recession — by some estimates 20 percent of the workforce left the trades — and a robust demand for building materials have created a competitive construction industry, Lazo said.

"We are dealing with an expansion economy in places like Tampa and Miami. … When there's a lot of demand and the supply gets scarce, dollar values go up," he said. "These storms would just put a burden on everything."

Does all this mean South Floridians will pay more to rebuild after Irma?

Anirban Basu, chief economist for Associated Builders and Contractors in Baltimore, said yes.

"There's obviously an impact on demand when a metropolitan area as massive as Houston is impacted, not to mention parts of Florida. And now there's Puerto Rico and its 3.5 million people, so that's an incredible amount of demand for construction materials in a very short period of time," Basu said. "It drives those prices very high."

Exactly how much prices could increase is uncertain. Nationally, construction costs could creep up 1 percent to 2 percent, but that would be higher when zoning in on South Florida or another area impacted by one of the recent hurricanes, Basu said.

"The demand in those places is so intense," he said.

Temporary Imbalance

Stacy Bercun Bohm, a partner in Akerman's construction law practice in Fort Lauderdale, said costs could fluctuate after the hurricane.

"After Hurricanes Harvey and Irma hit large parts of the Southeast, it is difficult to gauge for how long price and cost fluctuations across the construction sector might last," she said. "Severe weather events like these cause temporary imbalances in supply and demand for construction services and materials, yet it's anyone's guess when market conditions will return to normal."

Drywall, lumber, steel and roofing material will be in high demand post-Irma, Bercun Bohm said.

The price of some of these materials has been increasing, according to ABC.

Softwood lumber costs increased 2.5 percent in August from July and 11.3 percent compared with August 2016, according to an analysis the trade association did of federal statistics.

"We found ourselves in a period prior to the storms during which material prices were already rising and now the storms have exacerbated this pricing," Basu said.

Other materials with increasing prices are concrete products, iron and steel, according to ABC. Some material prices, however, decreased. Prepared asphalt, roofing tar and siding product prices decreased 1.9 percent in August from a year before.

George Cuesta, principal of general contractor Cuesta Construction in Sweetwater, said suppliers had enough materials for a stable construction industry — but not enough for post-Irma demand.

To put some of the needed materials in stock, a cost increase is possible, Cuesta said.

"When you have these events that happen from one day to the next, it just sort of exposes the lack of resources that you might have," he said.