All the good retrofit companies are booked up with work, leaving some owners with no choice but to hire inexperienced firms.
As apartment owners prepare to deal with the Los Angeles, Santa Monica, and West Hollywood seismic retrofit program, you need to consider the current market conditions of general contractors and structural engineering. Today’s demand for engineers and contractors is much higher than it was in 2015-2016, when the soft story retrofit ordinances were passed. If these trends continue, you will have a very hard time finding a contractor or structural engineer that is available to work on your seismic retrofit program. The longer you wait to retrofit your soft-story building, the more you will have to pay. In this article, we look at San Francisco as a case study. If we study how property owners and city officials are responding to the seismic retrofit ordinance’s impact on the marketplace, then we can learn which pitfalls to avoid.
Case Study in San Francisco: 484 Delinquent Buildings (have not met the city mandates to initiate a retrofit)
In 2013 San Francisco passed a series of retrofit ordinances for soft-story wooden structures and Non-Ductile Cement Structures. Much can be learned by the markets response to the ordinance and it gives us a glimpse of what we can expect here in Los Angeles, as well as in Santa Monica. The retro-fit ordinances trigger property owners to invest a significant amount of money into the property. In most cases, the common response is to postpone the retrofit project as long as possible. The article cited below describes in detail one possible pitfall that may occur in Los Angeles if and when large numbers of property owners delay on the commencement of retrofit work. You should know that the regulating city breaks up the list of property owners into large tiers. The City then sends out notices that hit the property owners in each tier at the same time. The property owners then reach out to the contractors, and engineers at the same time. This causes a ripple affect across the construction industry resulting in the conditions that manifested in San Francisco. An article published by the Curbed.com describes what can happen when building owners wait until the last minute to comply with seismic retrofitting requirements. After 4 years and the first deadline, Curbed reports that 484 buildings had not even filed plans with the city. San Francisco promptly labeled them as delinquent. It is important to note that San Francisco passed the seismic retrofit ordinance in 2013, 2 years prior to the City of Los Angeles. This is relevant to Angelinos because San Francisco offers a snapshot of what can happen to engineering costs and construction costs in Los Angeles, CA. In Los Angeles, the cost of procrastination may hit the wallets of property owners. The following items are potential outcomes based on the current and forecasted market conditions.
Don't Make This Mistake
This is the number one mistake I always see owners make, and it gets their project started on the wrong foot. Watch my video above and learn how you can avoid making the same mistake.
Contractor Supply and Demand Parallels between San Francisco and Los Angeles
In San Francisco, Building Owners’ response to the soft Story ordinance was too slow. There was a “wait and see" attitude. In San Francisco, only 14% of property owners in “tier group 1” acted in bringing their building into compliance of the new seismic code. This occurred despite being 3 years into the mandate. During the past 4 years, the demand for construction services had skyrocketed. A simple economics 101 principle: when demand rises, so does cost. A limited supply of soft-story retrofit engineers and construction know-how is real. The demand for such skillsets is about to rapidly increase. Thus increasing the price. Supply and demand Is real. Fast forward to the present time; San Francisco general contractors that were idle four years ago, now have fully booked schedules. These San Francisco contractors are booked with home additions and major home remodels projects. Think about it, General Contractors have virtually no incentive to purchase $20K worth of specialized tools, training, and equipment that is needed to execute soft-story retrofits. These contractors see no need to take on any soft-story retrofit jobs until one of two things occur; prices for soft-story retrofit construction goes up, or the general construction market slows down. Either one of these scenarios is bad for property owners because they will be rushed to hire a general contractor. On top of that, many of the contractors that will be available in the future will have very limited experience with soft-story retrofit construction projects because they are late to the game.
Don't Wait Any Longer to Start your Soft Story Retrofit
Next year the Los Angeles retrofit ordinance goes into its 3rd year. It is expected that many building owners will be forced to act towards getting engineering plans developed and construction quotes printed so they can submit their plans to the city. We predict that 2018 will be the cheapest time to perform a seismic retrofit until the demand for construction will begin to trend upward. The demand for engineering has already increased. Many engineers are currently experiencing a 4-6 week back-log. In the case of property owners that do not meet the deadlines, the city of Los Angeles, Santa Monica, and West Hollywood, will start issuing “Order to Compy” notices in the mail and will back it up with strict code enforcement. As more building owners try to find retrofit construction services due to pending timeline requirements, the strain on the construction industry will increase. This dynamic will surge construction prices across the board. We know that soft story buildings have collapsed in the past, several buildings collapsed during the Northridge Earthquake in 1994 in Los Angeles (pictured below) and the same occured in 1989 after the Loma Prieta earthquake.
(A Los Angeles police officer stands next to a collapsed apartment building after the 1994 Northridge Earthquake. Image courtesy of AP)
Structural Engineer Shortage
San Francisco building owners have already experienced the shortage of available engineers and qualified general contractors to perform the soft story retrofit. It should be mentioned that the Bay Area has over 54,000 soft story units that need to be retrofitted. The city of Los Angeles and Santa Monica have an estimated 15,000 soft story units that need to be retrofitted. A stark cry from the Bay Area, but it is important to understand that only a small percentage of contractors in the area have the skill sets and experience to handle these projects. Structural engineers are in short supply and are focused on the type of projects that they know best. It will result in a smaller labor pool during a time of rising demand. It is to your advantage to start booking your structural engineer early, the sooner the better.
Demand is Going Up
Bay Cities Construction predicts that demand for structural engineers will elevate in Summer 2018 and peak Spring of 2019. We are forecasting prices of soft-story retrofitting construction and engineering costs to increase as demand for these services to manifest. The cost increase could be as much as 15% - 20% by December 2018. The next demand wave is projected to occur in March 2019 and you can expect an additional 20% and as much as 25%. The closer you get to 2020, the tighter the labor pool will be, and harder to get anyone to work on your project. The other aspect to consider is time; as demand rises, so will the turnaround time for construction drawing creations and cost quotations from contractors. The limited labor pool will increase the preconstruction timeline from 2 months to 4 months. If this occurs many property owners could be facing city penalties.
Note the termite damaged beam
In the picture above you can see one of the cantilevered columns attached to the termite damaged beam. The damaged beam should have been replaced, but this would cost thousands more. This contractor decided not to deal with the damaged beam and just left it in place, and the city inspector did not raise this issue. We know this because just a few days later this section of the building was covered in stucco lathe.
Expect to Pay More
Let’s talk about money. Currently, you can expect to pay from $35,000k - $80,000k on a 3 to 5 unit building for the construction costs. Those prices could rise to $47,000k - $108,000k. Now you may be thinking that this is a wide range. This is because the site conditions vary so much from location to location. In order to get an accurate price, you should only consider a quote accurate if it is based on an approved set of construction drawings.
This is a 4-unit residential building that is on a slope. Very different in how to approach the retrofit.
This image is of a mixed unit building with Commercial space at street level, and residential units at the rear.
This is a 3-story building with a tremendous amount of front open soft story parking at the front and rear of the building.
The cost of retrofitting these three buildings varies greatly and great care should be taken to determine what it will take to retrofit the building.
If you plan to finance your soft-story retrofit project, property owners should consider that interest rates may go up within the next 2 years. Sales demand for soft-story buildings could become stagnant or decrease which could affect various factors. Financing options could be affected by falling prices of soft-story buildings that have not been retrofitted. Building owners should consider these possible factors and their impact on their investment.
Want to Learn More?
If you want to learn everything there is to know about soft-story retrofits you'll want to check out our most in-depth article What is a Soft-Story Retrofit? Everything You Need to Know About Retrofits on our new website. There, you'll be able to access all of our retrofit blog articles, case studies, our retrofit gallery, short videos, and enjoy free access to our full-length soft-story webinars. Our team has developed all this content for property owners like you. It is your destination to learn all about the retrofit process. Bay Cities Construction and Soft-Story Retrofit Pros is here to help answer any questions you may have about your retrofit project. Our team has the experience to Engineer & Build a Cost-Effective Retrofit Solution for your property. Get started today by visiting our website at www.softstoryretrofitpros.com to schedule a free assessment.
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For over 15 years Soft-Story Retrofit Pros has helped hundreds of homeowners with their projects. When you hireRetrofit Pros you don’t just hire a contractor, you hire an entire team of Pros. With several years of experience, our team has the expertise to help you Design, Engineer, and Build Your Retrofit Solution. We also represent you City Representation when submitting your plans and ensuring they are approved, and we handle all the Permit Processing so you never miss a day of work. If you think Retrofit Pros is the right team for you, contact us today. We have the experience, knowledge, and know how to help you save time & money on your seismic retrofit.
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