A Soft Market Helps Keep Some Recreation Center Dreams Alive

A soft market may make the current economic downturn the ideal time to keep alive your vision of a recreation center.

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Though the recent economic downturn has universities examining every budget line item, including the decision to invest capital in the construction of state-of-the-art recreational facilities, there appears to be no call for retreat in the facilities arms race. Even in a recession, conventional wisdom maintains that recreation centers are critical to student recruitment and retention. Participation in intramurals, club sports and informal activities has increased by the tens of thousands nationwide, and by most accounts, student interest in health and wellness shows little sign of atrophy. In many cases, the desire for recreational services is so great that students are still willing to pay fee increases through referenda to help cover the cost of new facility construction. Moreover, the current "millennial" generation of students is coming to college campuses in greater numbers and with higher expectations than its predecessors. Members of this historically large demographic - especially those fortunate enough to have graduated from high schools with topnotch athletic facilities - are looking for amenities, and recreation centers that deliver the goods can have a significant impact on which colleges these students choose to attend. Even facilities built as recently as 25 years ago have been rendered obsolete. To be sure, many institutions, having seen their endowments greatly devalued by a flagging stock market, are trimming budgets, freezing new hires and putting construction projects on hold to preserve capital. The shifting of priorities in state funding is also leaving sinkholes in state and community colleges' education budgets, causing many to downsize or shelve immediate or long-term plans and adopt a wait-and-see approach. But while a sluggish economy may be putting the brakes on the recreation center building boom witnessed over the past two decades, an institution's dreams don't necessarily need to grind to a halt. In fact, some schools are finding that significant declines in construction costs make this the best time to build. Contractors hungry for work have created more competitive pricing, labor is more readily available, and escalation rates have dropped nearly 6 percent from a year ago and more than 9 percent since 2004. Steel prices have dropped steadily since last July, too, and the decline in housing startups over the past two years has resulted in a continual drop in lumber prices. Meanwhile, the dramatic decrease in crude oil prices has lowered transportation costs. All of these factors mean lower overall costs, encouraging some universities to push ahead with their original plans. With everyone scrambling to figure out how best to prepare for the future, what can you do during uncertain times to keep alive your vision of a new recreation center? Here are three things to consider:
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1. Strategic Plan Development If you are in the very early stages of formulating your vision, one approach is to commission a strategic master plan or feasibility study to initiate the design process. Preparing a feasibility study is a quick and effective way to identify project goals, outline program needs, create a project budget and develop fundraising materials. The study can update previous studies or advance current thinking to a greater level of accuracy and detail. Once you have a plan in place, you will be better prepared to respond quickly to funding opportunities or to changes in market conditions. A feasibility study also is a well-organized approach to identifying your needs without spending a fortune. A study can range anywhere from $10,000 to $100,000 or more, depending upon the scope and complexity of the work. The time frame for completion typically ranges from one to nine months, with the majority of studies completed within six months. If you are in the middle of a capital campaign, expect a longer time frame to meet your financial goals. Even though a weakened economy strengthens your case for much-needed financial support, private donations may not be as forthcoming. Work closely with your development office to identify potential contributors and to prepare marketing materials that will be the most effective in enticing donors. Architects can create very realistic computer-generated images to vividly illustrate for potential donors how a building will look and function. 2. Accurate Cost Estimation Before you get too far along in the process, confirm the project budget. In the current economic environment, all eyes are on the bottom line, and the phrase "fiscal responsibility" has taken on new meaning. The budget is perhaps most important in the early stages of design, when opportunities are greatest to control the total project cost. Early on, you can decrease the total building area or select an alternative site that requires less development or infrastructure. As the project moves further into design, it is more difficult and costly to make such significant changes. Also, make sure you understand the difference between construction costs and project cost. Construction costs correspond to the actual bricks, mortar and labor used to construct the building, including a five-foot boundary line beyond the outside edge of the building; any construction beyond the five-foot line falls under site development costs. Construction costs typically make up 75 to 80 percent of the total project cost. The remaining 20 to 25 percent is often referred to as "soft costs," and includes permitting; architectural and engineering fees; legal costs; furniture, fixtures and equipment (FFE); and contingencies. The project cost is the sum total of all construction and soft costs. Consider enlisting the help of a cost estimator or general contractor for preconstruction services. These parties will share their understanding of constructability issues, local labor markets and material costs. Their insight will help guide you toward a realistic construction cost estimate that meets your budget. Cost estimates can be prepared to various levels of accuracy and detail, depending on where you are in the design process. In the early project phases, when details on building materials and systems are limited, it is difficult to achieve a high level of cost-estimate accuracy. Instead, an order-of-magnitude estimate can be prepared by multiplying historical benchmarked average costs per square foot by an overall building area, thus providing a reasonable range of predicted costs based on historical data. To prepare a more precise cost estimate, the contractor or cost estimator requires detailed architectural drawings and specifications. The architect and engineer should identify the location and type of all major construction materials, including the building foundation and structure; exterior cladding; mechanical, electrical and plumbing systems; and interior finishes. The total cost is calculated as a sum of all individual building components, including contractor labor, overhead and profit. The cost estimate should account for design and construction contingencies. Design contingencies ranging from 5 to 10 percent should be carried throughout the design process in decreasing percentages as the project moves through the construction documents phase. Construction contingencies range from 3 percent for new construction to 7.5 percent for renovation, and represent money set aside to cover changes that occur in the field during construction. Renovation projects typically carry a greater risk of unforeseen conditions and therefore more contingency. Include contingencies for unknown site development conditions such as uneven topography, potentially contaminated soil, and utility and other infrastructure costs. When benchmarking costs with peer institutions, make sure that you are comparing apples to apples, because such information can be misleading. Use special caution when comparing the cost of your project to another project in a different state, regardless of the similarities between the projects. Labor markets vary significantly from region to region, as do hard and soft costs. In addition, the cost of a completed building was established during the bid period before construction began.
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3. Potential Cost Reduction At the beginning of concept design, prepare a contingency plan in the event that the cost of construction exceeds your budget. In the contingency plan, identify a list of spaces that could be subtracted from the original program, or constructed in a later phase, to bring the program in line with the budget. Then, if the project does run into financial difficulty, everyone on the steering committee has already agreed upon reductions and phasing scenarios. It is much easier to make such decisions at the beginning of a project than when under pressure. When putting together the contingency plan, keep your eyes on big-ticket items such as building structure, roofing materials, exterior envelope factors such as the amounts of brick and glass, and mechanical systems. In general, greater exterior surface area results in higher costs. A reduction in building height or the complexities and articulation of the exterior facade will reduce costs. For example, a membrane roof is much less expensive than standing-seam metal roofing. Don't focus too much on interior finishes in the contingency plan; interior finishes are only associated with around 8 percent of total construction costs. Considering the impact on aesthetics and the amount of physical exposure from high use, it is often not worth the savings in the long term to skimp in this area. If you must, scale back your original plans. Any reductions in the width of large-volume spaces such as pools, gymnasiums and field houses will yield the greatest savings. The longer the structure has to span across an open space, the deeper the structural trusses need to be, resulting in higher costs. For example, a reduction in pool deck width can substantially change the overall length of the long-span structure and yield significant savings. Indoor aquatic spaces are usually the most expensive spaces to construct anyway, primarily because of the durable, moisture-resistant architectural materials and additional mechanical systems required to minimize potential corrosion within the pool environment. However, altering the size and shape of the pool itself, or reducing the number and height of water slides and diving platforms, can allow for more economical building dimensions. If you find that you cannot afford to build what you have currently designed, then a value engineering analysis may be useful. In value engineering, all aspects of the building are reviewed in great detail in search of cost reductions while still meeting the desired program to the greatest extent possible. This often results in suggestions to use lower-quality materials or a reduction in building area. To avoid such drastic measures late in the process, organize program areas to allow a space to be reduced or eliminated if the cost proves to exceed your means. For example, removing a single court from a four-court gymnasium might save a project more than $1 million, depending upon design features and site conditions. Be sure to consider life-cycle costs throughout the value engineering process to provide a complete picture of the long-term savings. A change in material may yield a reduction in initial capital investment, but it may end up costing you more over the long term in energy or replacement costs. If you are in the middle of construction, it is very likely that the funding for capital expenditures is already in place. Stopping and restarting a project incurs additional costs and can be quite expensive, so it should be viewed only as a last resort. Even though stopping a project can quickly save capital, it is likely to cost you a good deal more in the end. Although this may not be the ideal time to champion construction of a new recreation center on some campuses, not all of the news is bad. Opportunistic universities are reaping the advantages of a soft market and moving forward. The economic stimulus package may provide some help, too - as much as $53.6 billion over the next two years for state education budgets, of which a portion could be used for higher education modernization. The key to keeping your project dreams alive is defining your vision, developing a realistic budget, anticipating change and creating a flexible plan that can quickly adapt to evolving fluctuations in the marketplace. Meanwhile, the key to keeping a clear head during times of peak project anxiety may well be a trip to your local recreation center or fitness facility. As college students across the country will attest, there is no healthier form of stress relief than physical activity.
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