The state of the construction industry
Curious to learn about the latest news in the construction industry and the importance of staying ahead of the supply chain? In our 16th Sharing Knowledge Series episode, host Kevin Vonderau, chief lending officer at Westfield Bank, is joined by guests Jason Winkler, president, Summit Construction Company and Carlin Culbertson, CPA, vice president, Assurance Services Group at Meaden & Moore.
Below are some of the top highlights from the conversation with Kevin, Jason, and Carlin. Watch or listen to the full episode here to learn more.
New construction and the supply chain
Meaden & Moore is a Cleveland based CPA firm that specializes in working with construction companies as they plan and execute their project. Carlin works closely with clients to make sure they understand the costs involved with a project and that they have a sound plan in place to stay on track.
Summit Construction Company is a commercial construction management firm located in Akron. Jason has seen a high demand lately for renovations, additions, and new construction.
The general advice to clients is to start a project as soon as you can, given the current supply chain challenges. Jason says it’s more important than ever for his team to be involved early and throughout each step of a construction project. He adds that it’s not as simple as, for example, signing a contract with a roofer and expecting to get those materials a few months later. Communication is everything to ensure subcontractors are getting the materials needed for their projects.
Carlin reminds his clients going forward that, despite the ongoing impacts of the pandemic and supply chain issues, we shouldn’t count on more stimulus money or PPP loans from the federal government. The question construction companies should be asking is, without a federal loan or stimulus, would your business be able to continue operating?
Impact of interest rates and rising costs
Jason has observed that the current historically low interest rates have encouraged more clients to take on financing for new projects. With rates slowly rising, Carlin adds that there shouldn’t be much impact on the construction industry any time soon, as lots of projects have already been financed. Carlin also noted that successful businesses have reasons for spending money on new projects other than just the fact that currently there are low interest rates. It’s important to remind clients of their goals and motivations for spending beyond just taking advantage of low interest rates.
Amid rising costs of materials, the guests agree that project owners should have a contingency plan if prices go up throughout the construction process. Putting aside extra money as part of an “escalation contingency” line item is how Jason recommends preparing for possible price jumps in the market.
Leasing vs. buying equipment
Carlin advises his clients to consider how much they plan to use construction equipment and anticipated maintenance needs will be involved before deciding to buy or rent. If a part breaks down, how easily can you repair it? Are you able to transport the equipment from job site to job site on your own? How much will it be worth if you sell it later? These are some of the key questions that clients should be trying to answer when deciding between buying or renting equipment for construction projects.
Trends in the construction industry
From Jason’s view, he’s optimistic for the industry. From developing energy efficient buildings to restoring historic properties, there are opportunities for builders to get different types of financing for these creative projects, which can be especially helpful amid rising construction costs. The bottom line is that communities want to see projects that benefit them take place, so it is worthwhile to find a way to make it happen.
Carlin sees a lot of potential in “building green” as well. He highlights an example of one of his clients that specializes in upgrading HVAC systems. By showing the energy savings that their business creates, they earn access to unique financing options that save them significant costs on their projects. Energy efficient projects have become more than just good for the environment, they have become good for the pocketbook as well.
Carlin closes with some workforce development advice for contractors. Companies can create a pipeline by working with or creating an accredited apprenticeship program, as well as connecting with area high schools to tap into the next generation of skilled construction workers.