The Building Cost Information Service are reporting that tender prices are not expected to return to pre-recession levels in the next five years. The next two few years were always expected to be tough but they predict that prices will continue to fall until growth returns in 2011. Worryingly though, building prices will rise steeply from then.
If their data turns out to be correct there is a small window of time to deliver extreme value on developments while build costs, land prices, interest rates and demand are all low. If developers are able to access funding the contracting industry is currently willing to price at cost just to stay in business. We would never advocate stripping out all profits because that is the road to disaster but open book tendering with pre-determined margins are increasingly attractive to both client and contractor alike.
We are seeing mounting evidence that clients are looking to dip a toe back in the market, so hopefully some of those unloved tower cranes will come back to life next year.