The Rise of Denver Construction Costs and Its Impacts

The Rise of Denver Construction Costs and Its Impacts

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The continued rise in construction costs has made Denver’s ongoing real estate projects more expensive, impacting developers and their profitability. Housing prices have recently become stagnant pinching more and more real estate developers whose estimated their projects based on increasing home values. Development deals that are in the planning stages, anywhere between pre-construction to design, are becoming significantly harder to draw out. In addition to the rising costs of materials, the shortage of construction workers is leading to rising labor costs which is compounding the problem.

 

If your development is in the pre-construction and design phase, we advise taking a step back and reconsidering your projections based on increased labor and materials costs and similar home values in the future. We have heard of recent real estate development projects that looked profitable during pre-construction but quickly became unprofitable by the time construction started.

 

Hiring HM Capital as your real estate development consultant in Denver will provide significant value in this area. We’ve outlined some basic things to consider below but will provide a much more in depth analysis on your real estate project. If construction costs are impacting your deal, here are some ideas to consider.  

 

Reconsider the Building Product. If you are concerned about the performance of your current development strategy, reconsider the product you are building. Over building and under building can both lead to decreased profitability. Take a look at the land you have purchased and see what’s missing from or popular in the community. Maybe instead of building a high-end duplex, a smaller fourplex will be more profitable with the current demand in the neighborhood. HM Capital will provide you with the analytics and research to help you make the right decision.

 

Use Different Materials. The cost of building materials and construction have been amplified with the increased tariffs on Chinese imports. To keep your construction and materials costs low, reexamine different materials and more affordable substitutes that will have a similar aesthetic, but a lower cost. For example, look into using more vinyl siding and less expensive wood accents, engineered stone countertops like quartz instead of granite, smaller well positioned windows rather than large bay windows, and other inexpensive materials that will achieve your desired appearance.

 

Try Pre-packaged Plans. If you are still in the pre-planning process, an easy way to ensure your development gets the best return on investment is using pre-packaged plans. HM Capital has a database of pre-packaged plans and elevations that have been proven to be successful in reducing design costs and meeting project specifications. This is a great way to save during the pre-construction and design phase.

 

The best way to ensure your development succeeds in a time where construction costs are high and the market value of housing has become stagnant is to speak with a real estate development consultant like HM Capital. You can collaborate with us on strategy and also have us oversee the project itself. There are many options for you to choose from depending on how involved you want us to be in your development process. HM Capital’s extensive experience with countless real estate development projects has placed us in a position where we are very confident in every project we work on. Contact us today at (866) 933-8432 and give us the opportunity to save your development.