Cherry Flats delay could be labor related

A controversial apartment project proposed in Springfield’s historic Rountree neighborhood is on hold with the property owner citing dramatic increases in construction costs as the reason.

Russell Meck of RKJ Properties LLC said the roughly $6 million project for which he received hard-fought city tax breaks last month will be delayed for an unspecified amount of time.

“It looks like construction costs have risen almost 30 percent since the inception of this idea for a building. Therefore, I will not be doing the project at this time,” Meck emailed to Springfield Business Journal. “I’m sorry, but it looks like I wasted a lot of people’s time.”

But industry data and area contractors report construction prices haven’t risen so sharply.

“There are a lot of elements that come in to people seeing cost increases. From when you do a conceptual budget on a project versus what the final project looks like after final design – it could be apples and oranges,” said Build LLC President Ron Barrett. “But I’m not seeing 30 percent [increases] on anything.”

According to Washington, D.C.-based trade group Associated Builders and Contractors Inc. construction input prices have not increased the last five months but are up 1 percent from a year ago. Prices had climbed the first half of the year to a 2 percent annual gain this summer, according to ABC researchers, citing a Nov. 17 producer price index released from the U.S. Department of Labor.

“We are seeing about 3.5 to 4 percent per year increases in materials,” said Jerry Hackleman, president of the Springfield Contractors Association and senior vice president at DeWitt & Associates Inc.

Meck did not respond to requests for further comment. His redevelopment plans filed with the city caught criticism from the Rountree Neighborhood Association, which collected signatures from some 400 residents opposing the project’s tax abatements.

For roughly 10 years, Meck has owned three adjacent Cherry Street lots on the northern end of Rountree, between National and Kickapoo avenues, according to information provided to council. His RKJ Properties LLC now is eligible to receive up to $385,000 in property tax abatements to reverse the current blighted conditions.

In a Letter to the Editor published Nov. 6 on SBJ.net, Rountree Neighborhood board member Diana Day wrote, “Citizen discontent is growing over projects like this one that benefit mainly the developers who allow their properties to deteriorate and then ask for public assistance to redevelop the land.

“Springfield is running the risk of overall blight backlash similar to what Columbia has experienced during its attempts to apply the tool more liberally.”

While construction price increases and the city’s philosophy on blight designations are in question, contractors say a real factor might be labor supply and cost pressures as a result of the recent upswing in commercial activity. Hackleman said via email labor costs are up 2.5 to 5 percent, depending on the job size.

“The one thing we are seeing that is affecting certain trades is the large quantity of jobs that are bidding in a compressed time frame,” Hackleman said. “A job that bids today may not need a peak number of workers on site until six months from now.

“The biggest challenge for contractors is the planning and organizing of their labor forces to meet those peek demands and yet still keep work available for their forces during the interim periods,” Hackleman added.

Noting materials prices in the Ozarks have been largely flat over the past two years, contractor Barrett said construction costs are slowly rising as demand for laborers leaves slim pickings among subcontractors.

“It’s a sign of the times. The market is busy,” Barrett said.

Build LLC’s project list includes the $15.5 million renovation of the Woodruff building into 90 apartment units, dubbed Sky Eleven. The company is in the middle of a center city student-housing boom in recent years with developments including Deep Elm, The Jefferson and Beacon Park, with a total value of $8.8 million.

In downtown, Woodruff developer The Vecino Group LLC converted the former Landmark building into an affordable housing complex dubbed The Frisco; it’s renovated the McDaniel building into student housing called The U; and it is remodeling the Sterling Hotel into studio apartments. On Park Central Square, Kansas City-based Dalmark Group and general contractor Straub Construction are busy with their $15.7 million renovation of the Heer’s building, and several multimillion-dollar projects are underway at nearby Missouri State University.

“Our lumber numbers are staying the same. Our raw materials are staying the same, but labor is going up because of supply and demand,” Barrett said. “Springfield does not have a large pool of subcontractors, so you can only spread yourself so thin before something has to give.”

Barrett said his company has recruited subcontractors from Tulsa, Okla., to Kansas City.

Closer to home, at Meek’s Lumber Co., Marketing Director Eric Sachse said prices on a few notable products have increased, but generally, supply costs are stable.

“We meet with a lot of different manufacturers and those guys will all tell you there is a ton of capacity, especially for wood products,” Sachse said.

He said oriented-strand board, which is commonly used in wood framing construction, has a retail price of around $10 per board foot. In recent years, that retail price has been as high $12 to $15 per board foot and as low as $7. Drywall has been largely flat and shingle prices are down slightly after roughly doubling between 2005 and 2012.

Steve Burrell, Springfield branch manager for Kansas City-based Carter-Waters Construction Materials, said he has seen modest increases in concrete supplies and steel products, such as rebar, over the past two years, but those have largely leveled off.  However, some materials continue to climb.

“Anything with a petroleum base to it, such as sealers, continues to go up,” Burrell said.