There is not enough evidence to support a fifth trend — construction projects being canceled in mid-stream because of insufficient funds — but there have been a few isolated incidents of this worst-case scenario,

Constructors & Associates managed the building of the Frost Bank Tower in Austin, Texas. The 22-story, 510,000-sq.-ft. (47,379-sq.-m.) structure was completed in January 2004. High-performance glass, used to provide the facility's exterior, is one of the building materials in short supply right now. Photo by Coles Hairston

mainly among luxury condo towers.
   More common have been construction delays caused by the inability to get needed building materials to the project site in a timely fashion. David Snyder, executive vice president of corporate business development for Dallas-based Constructors & Associates, says that several high-rise projects in Dallas have ground to a halt because the contractors could not locate enough high-performance glass to finish their structures.
   That has not happened to any projects performed by Constructors, Snyder says, because the company has longstanding relationships with all suppliers of essential building materials.
   "The corporate client hires our firm for scheduling and availability of materials and because of our relationships with our sub-contractors," Snyder says. "You can get a commitment from a building-materials manufacturer if you can give them a firm order."
   Snyder notes that "overall, we have seen a 10- to 15-percent increase in construction costs over the past 12 months. Steel and concrete spiked up to 25 to 30 percent in the past year, mainly because they both require a lot of energy to produce. A lot of petroleum-based products, such as PVC pipe, also went up in price considerably, particularly after hurricanes Katrina and Rita took out a lot of the oil platforms and refineries in the Gulf Coast region."
   The biggest cause of material shortages and price spikes, however, is simply demand.
   "The construction industry is going through a period of very strong demand right now," says Snyder. "High-performance glass is hard to acquire now, with delays of as much as 30 weeks to fill an order. There is a shortage of Sheetrock because of capacity. And concrete and steel are in high demand because of all the high-rise towers being built."
   Snyder says that corporate facility planners can cope if they adopt the right strategies. "My advice to corporate real estate executives is to anticipate your needs well ahead of time, hire a construction-management professional with experience in this area and use a historical database to track supply and costs," he adds.
   An analysis of the Site Selection/NAI Industrial Location Index shows that the cost to build a typical 100,000-sq.-ft. (9,290-sq.-m.) shell industrial building increased most dramatically last year in these markets: Atlanta, up 14 percent; Chicago, up 14 percent; Houston, up 19 percent; Los Angeles, up 36 percent; Phoenix, up 14 percent; San Francisco, up 67 percent; and Seattle, up 14 percent. With building costs that high, more site selectors are opting for a less expensive solution: finding an existing facility.
   "The real issue here is the speed needed for implementation. More and more companies are under the gun for competitive reasons to move quickly, and often existing buildings with some retrofitting can meet this time demand much faster, assuming that other business factors are not severely compromised," says Gene DePrez, site consultant for IBM Business Consulting Services in Florham Park, N.J. "It will often depend on the type of operation and work force needed. Technology platforms and equipment lines are far more modular today, permitting greater flexibility in finding facilities to accommodate them."
   Ed McCallum, senior principal of McCallum Sweeney Consulting in Greenville, S.C., agrees. "As a matter of fact, the cost of the building is not the issue," he says. "The opportunity cost, however, associated with schedule delays to the project usually far outweighs the cost of any initial increase in capital investment."