Construction expenses will have doubled in the 10 years before the 2010 Olympics, group predicts
Derrick Penner
Sun
A major British Columbia construction-sector association is warning that the cost to build in B.C. will climb 55 per cent by 2010, putting efforts such as the province’s Gateway infrastructure project in jeopardy if planners don’t account for rising prices.
Philip Hochstein, president of the Independent Contractors and Businesses Association of B.C., said his organization has compiled research that shows construction costs have ballooned 45 per cent since 2000. The forecast 55-per-cent jump in costs means construction expenses will have doubled in the 10 years leading up to the 2010 Olympic Games.
Hochstein said rapidly rising construction wages, which were depressed during the 1990s, are the main culprit.
Until now, he added, rising material costs “have been masked” by stagnant wages and by companies that shaved profit margins to win business during lean times. However, the sector is now in a boom, and companies and workers are trying to catch up, which is biting into construction budgets.
Hochstein counselled caution for those looking to hire contractors, such as the provincial government, which has billions in infrastructure projects planned, including the $3-billion Gateway transportation initiative.
“The Gateway project is required because we need it for our own provincial productivity,” Hochstein said. “[Government officials have] to be very careful how they budget for that project and make sure they include for that kind of construction inflation that is likely to continue until 2010.”
B.C. Transportation Minister Kevin Falcon did not respond to a request for an interview Monday.
Ballooning construction costs are also plaguing the Vancouver 2010 Winter Olympics.
Vancouver Organizing Committee CEO John Furlong, late last year, warned that inflation would increase the prices to build venues that Vanoc had stated in the bid it submitted to win the Games.
Last fall, Furlong made a request to both the federal and provincial governments for additional money. However, as late as last week, Furlong delayed plans to unveil the scope of Vanoc’s construction-cost overruns.
A Vanoc representative did not respond to a request for an interview Monday.
Colin Hansen, B.C.’s minister of Economic Development, was not available for an interview Monday, but during a scrum with reporters in Davos, Switzerland, Hansen said he believes rising costs won’t break the province’s budget for the Games.
Hansen said B.C. budgeted $600 million for Olympics-related spending: $461 million to meet its basic commitments, plus a $139-million contingency fund, and Hansen added that Vanoc is “comfortable with that.”
“I’m very confident, with where we are now and the work that’s been done, that the allocation that we’ve made as a province is going to be adequate,” Hansen said.
Others in the construction sector remain skeptical that construction inflation will remain as steep as the ICBA is stating for as long as it is anticipating.
Keith Sashaw, president of the Vancouver Regional Construction Association, said he expects that an easing in residential construction activity, which is expected to begin in 2006, will ease the pressure on costs.
As well, Sashaw said construction costs are influenced by global trends, and if there is a downturn in economic conditions elsewhere in North America it will also mitigate rising costs.
“I don’t think it would be too accurate to take a look at what’s happened in B.C. over the last year, and what we expect to happen this year, and straight-line [the estimate] out to 2010,” Sashaw said.
Hochstein said the ICBA based its expectations for inflation on the forecast of BTY Group, a major construction quantity surveyor in B.C.
The BTY Group projection is for construction costs in B.C. to spike upward by 11 per cent in 2006, 10 per cent in each of 2007 and 2008 then tail off to eight per cent in 2010.
Hochstein said the provincial and federal governments could ease one driver of cost inflation by streamlining immigration rules for skilled tradespeople to enter Canada to work in construction.
Hochstein said so many trainees have entered the construction workforce in recent years that it has hurt the sector’s productivity.
BUILDING-COST BOOM:
The prices to build in B.C. have ballooned due to increasing costs for materials from lumber to concrete and steel as well as wages, which remained stagnant through the 1990s. Here are some costs per square foot:
2005 2006 % change
Residential highrise
$202 $230 +13.9%
Low-rise condo (Greater Vancouver)
$178 $187 +5.1%
Low-rise condo (outside Vancouver)
$98 $113 +15.3%
Townhouse (Greater Vancouver)
$115 $122 +6.1%
Townhouse (outside Vancouver)
$90 $98 +8.9%
Source: The BTY Group
© The Vancouver Sun 2006