In the last 12 – 18 months, an upward shift in tenant improvement (TI) costs needed to secure tenants have had landlords and property managers revisiting their budgets. Since January 2016, we’ve seen TI costs increase between 10% – 12% and timelines to deliver extend. So, why are construction costs increasing and finish outs taking longer?
Top 10 Reasons Construction Costs Are Up and Projects are Taking Longer to Deliver
- Growing demand from tenants for amenity rich/specialty tenant improvements are
driving higher TI costs
- After hours labor costs required for occupied properties to minimize disruption to
- Soft-costs have increased due to a hike in MEP and architect fees
- Cost increases associated with city regulations for energy efficient systems such as LED lighting or building control systems
- Surge in applications for permits are causing further delays
- Lack of contractors and/or availability of contractors
- Skilled labor (licensed, specialty certifications) in high demand
- Subcontractors are all competing for the same skilled labor causing delays in obtaining their service
- Other construction projects competing for labor including hotels, roads, office and multifamily construction
- Concerns over the current administrations’ political immigration policy and its potential negative effect on the labor pool
Find out more about national and local construction costs by downloading JLL’s Fit Out Guide that walks through “the real cost of building out”. Austin specific numbers can be found on pages 16, 19 and 20.