2020 Crystal Ball: Costs Will Rise

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As the sun rises on a new year, so will the costs of doing business. While this is a broad statement and can cover nearly every element of your business, from staffing to operations, we’ll focus on the Design-Build aspect of things, that is, the idea of growing your Branch Network and standing up a new Main Office or Facility Building.

2020 Cost Challenges

The economy continues to be strong, though the winds of change are swirling, with many experts divided on actual direction. Regardless, interest rates are down and consumer confidence is up.

Architecture firms and Construction firms are citing steady business and forecasting growth in 2020. With this comes increases in costs. While material costs are not nearly as impacted as they were 2 years ago with tariffs on raw materials like lumber, steel and aluminum, costs are still forecasted to rise, ironically, because the industry is busy. According to Producer Price Indexes (Bureau of the Labor Statistics by the AGC), a 12-month run of 0.0% increase in material costs ended in September 2019 due to newly implemented tariffs from China.

And, when businesses are growing and forecasting growth, contractors and subcontractors also stay busy. With jobs being plentiful, bids are inching higher than industry averages, according to ConstructionDive. With skilled labor being tied to a steady flow of jobs, the unskilled labor force and shortage of a skilled labor force causes price increases due to competition and even an extension of completion times.

How Does a Retail Banker Manage Costs

Despite some cost headwinds, there are strategies that a Retail Banker can plan for and implement to manage costs across a single or multiple projects.

Prototype Design

Once an overall design is chosen for a prototypical branch, the right planning and foresight will allow this design to scale in square footage size and type. If the branch design and purpose is to remain the same across different locations, but these locations vary in total square footage, think of a balloon expanding or contrasting. The basic elements grow or shrink accordingly.

If you aim to deploy different types of branches (Hub, Spoke, Specialty, etc.), a kit of parts strategy can be implemented to lay the foundational purpose of the branch elements within, so they can then be chosen in a plug-and-play manner across different locations.

Modular Design

As an added element, design specs across multiple locations can be pre-built, with one module fitting alongside an already existing module, either for present or future use.

This strategy is particularly useful for larger spaces that are not entirely needed now, but will be ready to be built in a near-term state.

Supply Chain Management

As noted above, raw materials are expected to rise, if they already haven’t begun to do so. If your Branch Transformation strategy involves multiple sites across a protracted timeline, it may very well be beneficial to procure the raw materials all at once, to take advantage of current costs and bulk pricing.

Even if you’re only ready to break ground on one site, the additional materials can be warehoused for future use. The short term storage costs will pale in comparison to the long term cost of buying raw materials in waves over months or years.

If you’re ready to begin discussions on your Branch Transformation and/or Main Office project and price is a concern, there’s no better time than now to begin speaking with the experts.

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2020 Crystal Ball: Costs Will Rise

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