Florida is no stranger to natural disasters, but did you realize how much a disaster can affect your construction project and costs? Even if the project itself is going to plan, the cost of bringing construction tools and materials to your site may increase.
This can be a big problem for people with contracts that dictate a final price for a project. It can mean losing out on your profits or even going into the red to complete the project as assigned.
A July 17 report describes how natural disasters have now made construction prices around 13% higher year-over-year based on June 2018 rates. The rates have increased as a result of tariffs on materials like steel and lumber and due to being unable to find as many willing workers.
With rising construction costs, home builders and developers run into trouble. They reduce profits and increase costs. Housing prices are already rising faster than the income levels in Florida, which will mean that the increased costs just add to the inability for some to buy homes or the homes that they would like to own.
How can you protect your profits in an uncertain climate?
Your construction contract needs to pass on a portion of the expenses to the client, perhaps with a contract that does not guarantee the final price but gives an estimate. Yes, some contracts will have a single price. For example, you may say you’re willing to build a certain single-family home for $200,000. However, it’s essential to include enough of a gap in that amount to protect yourself against rising costs. If not, construction teams, designers and others will find themselves working for next to nothing due to restrictive contracts.