Heartland Feature Archive

Construction projects are taking longer to complete and costing more to build than they did prior to the COVID-19 pandemic. The supply of available materials dried up considerably during the pandemic due to shutdowns and social distancing requirements, which reduced capacity at manufacturing plants. Those supplies continue to be constrained, and lead times for receiving materials are massively elongated.  For example, when placing orders for roofing insulation, builders can now expect a 180-day lead time versus just two weeks pre-pandemic, says Todd Sachse, CEO and founder of Detroit-based Sachse Construction.  Open web steel joists now have a lead time of 35 to 45 weeks when previously they were available in four to six weeks. Even getting standard paint has been an issue, according to Sachse. The cost of lumber has come down to $399 per thousand board feet after spiking to an all-time high of $1,515 in May, according to Fortune. But there are still price hikes on shipping costs or items like glue, says Sachse. “These price hikes have cancelled projects, put some on hold and have placed a strain on subcontractors and trade partners who did not procure materials quickly and are not able to recoup the differences.”  …

By Jerome Wallach, The Wallach Law Firm In the budgeting process each year, property owners ask tax attorneys to estimate their projected tax exposure for the coming year or, in the case of multi-year cycles, what their property’s assessed value will be. Customarily, attorneys experienced in real property tax appeals find answers to those questions by using traditional valuation methods: The cost approach is applicable to newer properties; the income analysis approach is tied to capitalization rates; and the comparable sales approach draws on recent, market-value transactions involving similar properties. In addition, the attorney will review the local assessor’s treatment of similar properties. Armed with such analogies, the advisor will predict the probable range of assessed values for the taxpayer and provide a computation of the tax rate against that value. These analyses are reliable within a reasonable range. At least until now. The nation may or may not be entering a post-pandemic economic recovery. What is certain is that the challenges created by COVID-19 have badly disturbed traditional methods of determining value. The concept of using a property’s recent historic performance as a predictor of future performance, used universally by market participants and assessors, has been gutted by a …

DES PLAINES, ILL. — When reflecting on the future of the economy and its recovery, sometimes it’s good to look back. For instance, one of the lessons learned from the pandemic of 1918 was that people will make up for lost time, says Scott Brown, chief economist for Raymond James. “That’s one of the reasons we had the Roaring ’20s.” Brown’s remarks came during the opening session of CORFAC International’s virtual spring conference on Wednesday, March 17. Brown hosted an hour-long panel on what’s driving the economy as well as the outlook for commercial real estate performance. Americans have made substantial gains in consumer spending on durable goods, according to Brown. Examples include the sales of motor vehicles, which have trended upward. Year-over-year increases in the consumer price index are likely to reach 3 percent this spring, but that is viewed as a rebound from low figures a year earlier. Inflation has risen to 2 percent and is on track to moderately exceed that figure. Keep in mind that government debt does not drive inflation, pointed out Brown. According to the economist, stimulus checks have not fueled a great deal of spending as Americans have utilized 70 to 80 percent …

With light emerging at the end of the COVID-19 tunnel thanks to the rollout of a vaccine, general contractors are confident of an uptick in business activity in 2021 following a year in which many projects were put on hold. But that optimism is clouded slightly by the high cost of materials, particularly lumber. Michael Sullivan Jr., CEO and founder of Des Plaines, Illinois-based Peak Construction Corp., says his company is prepared to absorb more of the rising costs this year than it did in 2020. Last year, many developers that Peak worked with were willing to take on the increased costs simply because they wanted to continue operating during the pandemic. “It appears that 2021 will change from that pattern, and we expect to see significant increased costs for many materials, subcontractors, insurance premiums and costs attributable to modified operating practices in the field,” says Sullivan. These cost escalations will erode profit margins despite increased revenues, he predicts. Adam Miller, president of Summit Design + Build LLC in Chicago, says lumber prices are nearly double what they were in September 2019. The reason is threefold: fires in the lumber source forests of the Northwest U.S.; disruptions and delays at …