Legislation and Construction Costs

By: Katie Roberts, Fiveash Stanley

At the onset of the COVID-19 pandemic, it was impossible to understand the myriad of ways a microscopic virus would upend all facets of our lives, from working, to educating our children, to purchasing toilet paper. The pandemic disrupted our healthcare infrastructure, our waste collection, even global trade and shipping.

Supply Chain Challenges

While some of these issues are resolved, a critical issue remains for the commercial real estate industry: the high cost and limited supply of essential construction materials. As has now been well reported, plant closures and production cutbacks at lumber mills around the country and in Canada are largely to blame for supply issues.

On the demand side, people in lockdown suddenly decided to address home improvement projects or needed to properly convert their garage or sunroom to a home office or classroom. Or, with remote work options part of the mainstream, individuals opted to relocate altogether, causing a surge in the housing market and driving up demand for inventory.

As it relates to commercial real estate, COVID-19 has ushered in a paradigm shift in workspace design. Rather than maximizing worker density or large collaborative spaces, the priority is now creating safe, resilient working environments.

Changes in workspace design require materials though. Materials that are expensive and may be in short supply.

Legislation and Construction Costs

Legislative Moves

Recognizing the severity of the issue in Georgia, Speaker of the House David Ralston created the House Working Group on Rising Costs of Construction Materials in May. In announcing the group, the Speaker said, “we know that the rising costs of construction materials pose a threat to our continued economic recovery … [this] group will look into why these costs are increasing and recommend solution to alleviate the burden on those building for the future.”

The working group held their first meeting on July 8. During the 5-hour discussion, the working group heard from representatives of the lumber and concrete industries, individual trades (plumbing, electrical, HVAC, general contractors, etc.) and the logistics and hauling industries. Members of the working group heard testimony that the price of lumber increased by 300% from spring 2020 to spring 2021, peaking at $1,515 per thousand board feet on May 28, 2021.

Soaring lumber costs and construction materials have an obvious impact on the bottom line. Another major driver is the project’s timeline, particularly as it relates to plan review and inspection. Thanks to proactive work by BOMA and other industries, builders in Georgia have been well-situated during the pandemic.

In 2019, the Association supported House Bill 493 to allow for private construction plan review and inspection of certain facilities after the local government failed to provide those services within thirty days. At that time, hospitals, nursing homes, jails, airports, and

As local governments shut down due in the spring of 2020 due to the COVID-19 pandemic, Governor Brian Kemp suspended enforcement of the thirty-day waiting period and allowed for private plan review and inspection on the previously excluded facilities.

When the 2020 session resumed in June, a broad coalition of real estate and construction organizations came together to encourage private plan review on these types of facilities be made permanent. That effort was part of Senate Bill 377 and was signed into law on June 30, 2020.

While the 2020 effort addressed the issue of previously restricted facilities, it did not address the thirty-day waiting period. As a result, that same coalition came together to support this year’s Senate Bill 49. It allows for plan review, permitting, and inspection by private professional providers and critically, allows applicants to select this option at the onset of the process, rather than waiting thirty days for the local government to attempt to provide the service. The applicant is still required to pay the local government up to half of their regulatory fee if they opt for a private provider.

The Road Forward

This legislative effort has allowed construction and development to continue during the pandemic, even though local government review offices have been shuttered or operating on limited staff.

We all hope the days remaining in the pandemic are limited – but it will take some time for these market swings in construction materials to return to a predictable pattern. The commercial real estate industry will continue to adapt office configuration and tenant buildouts in the post-pandemic workspace, especially if a significant portion of the labor force remains remote.

As individual businesses and entire industries continue to react to the changing landscape, it should come as good news that the Georgia General Assembly is also exploring legislative solutions to aid in that effort. As Representative Marcus Wiedower, Chair of the House Working Group noted, the legislature is “eager to find ways to help alleviate the burden of rising construction material costs on hardworking Georgians.”

For more information on the Working Group, please visit www.house. ga.gov or contact BOMA Georgia today.

About the Author

Katie Roberts serves as Director of Government Affairs at Fiveash-Stanley, Inc. In this role, she is critical in managing legislative and regulatory issues specific to the industry. Fiveash-Stanley is recognized as one of Georgia’s leading government and public affairs consulting firms and has represented BOMA Georgia since 2000.

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