EAGLE COUNTY — From workforce housing to high-end real estate, construction costs are stretching budgets almost to the breaking point in the Vail Valley.
During one of the panel discussions at the recent U.S. Mountain Community Summit in Vail, Gerry Flynn, developer of the new Spring Creek Village workforce housing neighborhood in Gypsum, said the project estimates had already changed four times due to construction cost increases. Flynn declined a request for a post-summit interview.
It’s not just workforce housing that’s affected.
Architect Bill Pierce has spent decades working in the Vail Valley. Pierce said his firm recently estimated the costs on a high-end home in the valley. The first estimates came in at roughly double the anticipated per-square-foot costs.
Even with a high-end home, “You can’t make money at that cost,” Pierce said.
‘Explosion of costs’
Pierce said the problems in the Vail Valley include a shortage of labor and steady, significant increases in material prices.
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“You combine those two, shake it up, and you get a big, loud explosion of costs,” Pierce said.
Chris Evans is one of the owners of Avon-based Evans-Chaffee Construction. Evans said the price of materials plays a big role in the rising price of building.
Then there’s the ever-increasing price of labor.
“With a labor shortage, people are paying more to get the labor they need out on the job,” Evans said.
And those costs are always shifting.
“It’s hard to keep a handle on (costs), even from project to project,” Evans said.
Tough to find workers
The valley’s current labor shortage is an echo of the collapse of the local construction industry that began in about 2009, the result of a nationwide economic slump. During that period, the valley lost several thousand jobs. Those workers haven’t returned.
“We’ve lost (so many) construction jobs to oil field developments,” Evans said. “The labor never really came back.
Vail-based Triumph Development works on everything from expensive resort homes to the Chamonix Neighborhood townhomes in West Vail. The firm is also working on a proposal to build workforce housing at a site just north of the East Vail Interstate 70 interchange. Triumph Chief Operating Officer Michael O’Connor said the causes of rising construction costs are complex, but boil down to supply and demand. At this point, there’s more demand than supply — that leads to rising prices.
Along with rising material prices, O’Connor noted that local builders have for several years had to rely on local labor. In the early 2000s, local builders could tap Front Range subcontractors in some cases. But those companies these days are busy close to home.
O’Connor said he’s sympathetic to Flynn’s situation at Spring Creek Village.
“Just when you think you have it figured out, there’s another gap,” O’Connor said. Estimating is a tough process these days, even programming in annual cost increases of between 5 and 7 percent.
Nearing a peak?
O’Connor said he doesn’t expect prices to back off their current levels. But, he added, prices may be about at a peak. Looking at construction calendars, it looks like there could be openings in labor availability later this year and into 2020, he said.
Pierce said he’s started hearing that “numbers are becoming quite undigestible” for many projects. Still, he added, his firm is involved in a few projects that are staying fairly priced and on budget, including a new starter shack at the Vail Golf Club.
Even if construction costs weren’t on a steady climb, O’Connor said, building in the mountains will always be tough. There’s a short building season, and geology that makes utilities more difficult. It can be complicated getting materials to the area, and there’s a limited labor pool. Beyond that, jobs on the Front Range tend to pay better.
All those complications raise costs. O’Connor said that’s why public-private partnerships are so important when building workforce housing.
“That’s how we’ll make a meaningful impact,” he said.
Vail Daily Business Editor Scott Miller can be reached at smiller@vaildaily.com or 970-748-2930.
By the numbers:
7.4 percent: Overall increase in construction materials and associated costs from September, 2017 to September, 2018.
29.3 percent: Increase in the cost of diesel fuel for the same period.
22.1 percent: Increase in the cost of steel pipe for the same period.
11.2 percent: increase in the cost of asphalt paving mixtures.
Source: Associated General Contractors of America
