The More You Wait, the More You Pay: Retrofit in LA, Santa Monica

Some apartment owners are choosing to wait, but is that the right choice?

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 retro-fit ordinance’s impact on the marketplace, then we can learn which pitfalls to avoid.

San Francisco Case Study: 484 Delinquent Buildings

As of this writing, 484 buildings in San Francisco have failed to meet the mandated deadline to start the retrofit process. San Francisco passed a major seismic retrofit ordinances in 2013. 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 post-pone the retro-fit 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 retro fit 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 retro-fit ordinance in 2013, 2 years prior to the City of Los Angeles. This is relevant to Angelinos because San Francisco offers a snap shot of what can happen to engineering 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.

This is the number one mistake I always see owners make, and it get's 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, demand for construction services had skyrocketed. A simple economics 101 principle: when demand rises, so does cost. Limited supply of soft story retrofit engineering and construction knowhow is real. The demand for such skill sets is about to rapidly increase. Thus increasing the price. Supply and demand Is real.

Fast forward to 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 to Start your Soft-Story Retrofit

Next year the Los Angeles retrofit ordinance goes into its 3^rd year. It is expected that many building owners will be forced to act towards getting engineering plans drawn 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 “notices of violations” 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. 

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 cost 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 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 pre-construction timeline from 2 months to 4 months. If this occurs many property owners could be facing city penalties. The retrofit ordinance of Los Angeles has attracted lots of "new companies" that offer seismic retrofit services, companies that did not exist just a few years ago. Lot's of these companies promise savings by literally doing less work and not adding as much reinforcement as the building needs. We've have personally seen projects with shoddy work, including the project pictured below in which cantilevered columns were attached to existing beams that had severe termite damage. 

In the picture above you can see the 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 $35,000 - $80,000 on a 3-5 unit building for the construction alone. Those prices could rise to $47,000 - $108,000. 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. Want to know how much you should expect to pay for engineering plans? Read How Much Do Retrofit Engineering Plans Cost?

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. It present different engineering challenges.  

The cost of retrofitting these three buildings varies greatly and great care should be taken to determine what it will take to retro-fit 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. Did you find this article helpful? What are your questions? Do you what to talk to a contractor and engineer about getting your building code compliant? Post your comments and questions below!

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. 

About Us

For over 15 years Bay Cities Construction has helped hundreds of homeowners with their projects. When you hire Bay Cities Construction 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 Bay Cities Construction is the right team for you, contact us today. We have the experience, knowledge, and knowhow to help you save time & money with a bolted moment-frame or shear-wall panel.

Ready to take the next step? We’re certain that Bay Cities Construction is the best general contractor for your project, you can Schedule an Appointment by clicking HERE. We offer a complimentary 1-hour consultation at our office, so you can meet our team and we can discuss your Soft Story Retrofit project. If you have been disappointed by other contractors, it's time to call one of the best seismic retrofitters in Los Angeles.

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