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Video related to this article is available below.Issue date: 4/28/08 Section: News
Increasing economic troubles drive up construction costs
Daniel Zinshteyn
With gas prices sitting at $3.51 a gallon nationwide, many people are finding it harder to get around. These same prices are making it more expensive for institutions like Penn to fund construction projects.
Recent economic troubles - especially rising fuel prices - are driving up construction costs, forcing universities and developers to plan ahead and take steps aimed at saving money.
The chief economist for the Associated General Contractors of America announced recently that the Producer Price Index - a measure of the price that producers charge for a product - of construction materials increased by 2.1 percent during the month of March.
A major factor in this price increase is the rising cost of diesel fuel, which is critical in transportation of heavy loads, steel manufacturing and heavy-machinery operation. Diesel fuel costs $4.14 per gallon nationwide, up $1.29 from a year ago.
Penn estimates that the cost of construction will increase by 7 percent each year, Vice President for Facilities and Real Estate Services Anne Papageorge wrote in an e-mail.
Papageorge said the University hopes green initiatives will reduce energy costs in the construction and maintenance of future structures.
Green projects can lessen the need for fossil fuel and electricity, which can lower energy costs.
Rising fuel prices and associated economic instability are expected to impact smaller developers much more heavily than larger institutions like Penn.
Robert Hoe, COO of Teres Holdings, the developer behind the Hub, said rising costs will make construction more expensive in the near future.
Hoe, whose company is planning a building adjacent to the Hub at 40th and Chestnut streets, said costs for the construction of that project have increased at least 5 percent over the past year.
He added that, as the economy slows, contractors are more willing to work for lower prices, since developers are less likely to be interested in construction.
Recent economic troubles - especially rising fuel prices - are driving up construction costs, forcing universities and developers to plan ahead and take steps aimed at saving money.
The chief economist for the Associated General Contractors of America announced recently that the Producer Price Index - a measure of the price that producers charge for a product - of construction materials increased by 2.1 percent during the month of March.
A major factor in this price increase is the rising cost of diesel fuel, which is critical in transportation of heavy loads, steel manufacturing and heavy-machinery operation. Diesel fuel costs $4.14 per gallon nationwide, up $1.29 from a year ago.
Penn estimates that the cost of construction will increase by 7 percent each year, Vice President for Facilities and Real Estate Services Anne Papageorge wrote in an e-mail.
Papageorge said the University hopes green initiatives will reduce energy costs in the construction and maintenance of future structures.
Green projects can lessen the need for fossil fuel and electricity, which can lower energy costs.
Rising fuel prices and associated economic instability are expected to impact smaller developers much more heavily than larger institutions like Penn.
Robert Hoe, COO of Teres Holdings, the developer behind the Hub, said rising costs will make construction more expensive in the near future.
Hoe, whose company is planning a building adjacent to the Hub at 40th and Chestnut streets, said costs for the construction of that project have increased at least 5 percent over the past year.
He added that, as the economy slows, contractors are more willing to work for lower prices, since developers are less likely to be interested in construction.
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