marc Posted March 6, 2009 Share Posted March 6, 2009 OK. So i have a question for those of you who know more than i do about financing large building projects. i understand that the economy is prohibiting lenders to extend credit for new projects right now. BUT, what about projects that were financed (or i assumed they would be financed) already? Couldn't those projects continue to be built? i see construction around the country, and i don't know enough to know why some cities continue to build while others don't. For instance, i was assuming that construction costs and such would be at an all time low these days. i wonder why developers don't take advantage of this- lower costs for materials, lower wages because construction workers are just happy to even have a job in an economy that isn't being too kind the that industry right now, etc. i know i sound like a MAJOR capitalist, it is just that i don't see why developers don't capitalize on something that can potentially triple their profits in time. i mean, the economy has to go back up in time......right? Give me your thoughts. m. Link to comment Share on other sites More sharing options...
TheNiche Posted March 6, 2009 Share Posted March 6, 2009 OK. So i have a question for those of you who know more than i do about financing large building projects. i understand that the economy is prohibiting lenders to extend credit for new projects right now. BUT, what about projects that were financed (or i assumed they would be financed) already? Couldn't those projects continue to be built? i see construction around the country, and i don't know enough to know why some cities continue to build while others don't. For instance, i was assuming that construction costs and such would be at an all time low these days. i wonder why developers don't take advantage of this- lower costs for materials, lower wages because construction workers are just happy to even have a job in an economy that isn't being too kind the that industry right now, etc. i know i sound like a MAJOR capitalist, it is just that i don't see why developers don't capitalize on something that can potentially triple their profits in time. i mean, the economy has to go back up in time......right?Give me your thoughts. m. Materials prices are a little screwy right now. Wood products are decidedly down, and so are the cost of fuels. Copper prices have no doubt fallen far enough to deter many a thief from attempting to pilfer my horde. However the costs of concrete and steel are still somewhat high. If you know where to find decent immigrant labor, your labor costs really haven't changed too much. Regions with a lot of immigrant labor had low labor costs before and they have low labor costs now. I've noticed that the owners of construction firms are starting to adjust their expectations somewhat, but that's only after they started edging up incrementally, apparently trying to shift their losses from other dead projects to ones that were still kicking. There's little doubt that they're hurting really bad at this point. I'm getting at least three major jobs done very nearly at-cost. In fact, I'm going way over budget getting all sorts of extra stuff done that wasn't even remotely within the realm of reason last year. I don't expect to be able to pass it along to renters any time in the next year or so, but I'm positive that there will be vast upside potential several years down the line as the economy returns to normalcy. ...but then, this is my situation. I already have financing (by virtue of a freakin' miracle). The reason that construction has stopped is that the money stopped flowing. It isn't that developers have given up or that they don't perceive an opportunity. Surely very large projects can take 18 to 24 months to complete, and if you're able to deliver new product to market in that time frame then you'll do well because nobody else can start on them today. The few developers that are able to line up financing take on a great deal of additional risk and agree to much more onerous terms than had been the case even a year ago. In short, it just doesn't make as much sense to develop...if developing is an option, which in many cases it just isn't. As for why various cities are at different places along the business cycle, well there are as many explanations as there are cities. Can you be more specific? Link to comment Share on other sites More sharing options...
jerryartic2112 Posted March 20, 2009 Share Posted March 20, 2009 Good points here, now is a great time to build, despite what many "experts" are saying. Link to comment Share on other sites More sharing options...
marc Posted March 23, 2009 Author Share Posted March 23, 2009 As for why various cities are at different places along the business cycle, well there are as many explanations as there are cities. Can you be more specific? For instance, in places like Houston, Austin, parts of LA, NY and Miami seem to be building full steam ahead. i know some projects are on hold, but is the construction i see stuff that already has the funding prior to the bottom falling out or is there something else at work. Oh, and what about the Medical Center? They seem to be doing pretty well in the construction business. Why is that? m. Link to comment Share on other sites More sharing options...
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