Most businesses and households as well, appear to be in a state of survival (hide in my shell) mode as the news continues to cast deeper shadows about current economic conditions. Foregoing the extent of the economic state, be it local, domestic or global: There are many question(s) to consider for all of us:
- What is the long term strategy?
- What is the vision for the company’s position at the end of this financial storm?
- Tough question: Do you expect to be on point for the rebound that will come?
Nobody knows for certain exactly when this recession will recede, and the economic engines will fire up again. Optimists have indicated the 3rd quarter of 2009 or earlier, while others believe that it could be another year or more pushing into 2010. If our companies want to be on deck for the ebb in which the tide turns, whether its 6 months or 18 months from now, the Time to Plan projects is now. As dark and gloomy as recent media reports have been, there is no doubt that there will be an economic recovery. We all want to be in the best place to take advantage of the market when the funds start to flow freely again.
Update: See recent article “Intel to Spend Heavily on U.S. Plants, Calls on Others to Invest” from the Wall Street Journal “... follow (their) it’s strategy of investing during the down turn“
There are numerous sub-topics and side debates to this overarching issue, the main point to make is that the current conditions actually presents a golden opportunity for positioning a company and business model by planning capital projects now. This is parallel with Warren Buffet’s attitudes about current markets and economic timings. A quote from a NY Times article by Warren Buffet published October 16, 2008:
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. ….. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.“
How do the current conditions of the economy present a window of opportunity? The major costs for a new facility project, perhaps obviously, are the site and the building. With economic conditions as they stand, the first costs for both of the above have never been lower and most likely will continue to shrink.
- Real Estate: The prospect to negotiate a favorable lease or purchase of a property has never been better. The market is extremely motivated and great values abound.
- Financials: Interest rates are at historic lows. And despite the fallout on Wall Street, there are plenty of banks open for business with cash available to lend to qualified interests.
- Material Costs: The costs of building and construction materials have ceased to escalate and are moving lower. They currently are lower than 2 years ago. For example: “$1.75 Price of an 8-foot stud, the lowest since 1990“
- Fuel and Energy: The depressed market value of crude oil is a bonus too. Not only does it reduce the associated transportation costs of building materials, it also factors into the construction process and resulting cost.
- Construction Companies: There are many companies fortunate to be currently involved with large projects that came off the drawing boards years ago. Just the same, the firm positioned for 2010 is considering now what project they will have in backlog. Other construction firms are eager to get involved with a “shovel-ready” project next month.
- Architectural and Engineering Firms: A recent AIA study indicated that the billing index for architectural firms was reported at 34.7 in October 2008, 15 points below the median which reflects no change. Firms providing planning, design and engineering are eager to provide extremely competitive proposals for projects. ArcWest Architects included!
Timing is everything: From the moments a capital project may be conceived in the board room to the point that it’s a built reality in operation typically requires no less than 12 to 18 months. If we conservatively anticipate that the economy will have moved past the recession one year from now, one might deduce that we are already behind the eight ball.
Our optimistic view is that the 2009 glass is half full, and the time to plan is now!
– Robin Adams
Please contact ArcWest Architects to learn more about how we can assist you.