Problem Solved: Getting a Grip on the Soaring Cost of Facade Projects

As part of our ongoing Problem Solved series, Habitat spoke with Gene Ferrara, president of JMA Consultants.

The rising cost of inspections. Most buildings nowadays are looking at double or triple the cost for complying with the Facade Inspection and Safety Program, or FISP. Just to get a FISP inspection started, you could be looking at anywhere from $30,000 to $50,000, where in the past you were looking at $9,000 to $12,000. The main reason for that is the probing of cavity-wall buildings every 60 feet of street elevation. Before, in the eighth cycle, you just needed one scaffold or one boom truck inspection per street elevation.

So when you add that cost in, and then you add in the fact that you're going to have to file for permits, sometimes you need street closures for boom trucks and all these other things, the costs have gone up tremendously. It can be troubling for boards, but that's the small piece of the puzzle.

Hard facts about soft costs. When you go to the actual projects, this is where it gets real scary. Let’s say last cycle your project cost was somewhere around $850,000, all in. That would be a medium to large project back in the eighth cycle Now that project is $1.2 million or more. That's a very large increase in a very short period of time, and most of that has to do with the limitations of a lot of the contracting firms.

These projects are becoming top-heavy with soft costs, as opposed to hard costs. Hard costs are things that improve the building — taking a brick out of the wall and putting a new brick in place. The soft cost is all the costs involved to file the job, to get you there, site safety, sidewalk sheds, special inspections. Of that $1.2 million job, $600,000 is soft costs.

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We lost a lot of contracting firms during the COVID period. Meanwhile, insurance rates have gone up, permitting has gone up, regulations and inspections from the Department of Buildings have gone up. There have also been increases in labor costs and in costs from the supply houses. All the quality contractors are saying, “Well, if I'm going to stay in this business, I need to increase my rates."

Think long-range. I tell my clients you cannot be doing these facade projects every five years, your plan must extend 10 to 15 years. We have many, many clients who have taken that advice. Others don’t. Let's say the facade only needs $500,000 worth of work, but if they want to skip the next five-year cycle by doing preventive maintenance, maybe it's another $250,000. But they decide not to do it. What they've done is they've committed themselves to another project in five years, and they've committed themselves to paying those soft costs again.

Start early. So I tell my boards to start projects as early as possible, make sure your contractors are buying the products they need early on, and warn them that they're not going to be given any increases during the course of the project if they cannot prove it was something out of their control. So if you know how much insulation you need, you better be ordering it the first day you get that contract signed. Lock in your numbers.