Construction costs push JE Dunn jail project price up 17%

Across the country, high material costs combined with mounting financing issues are adding to the time it takes to get projects across the finish line.

For example, Irvine, California-based Shopoff Realty Investments paused construction in March on its $550 million Las Vegas Dream Resort project due to construction financing issues. Meanwhile, New York City-based Vornado Realty Trust also hit pause on an 18 million-square-foot project in midtown Manhattan because of unfavorable capital markets.

Another similar issue is playing out in the Midwest. 

After breaking ground almost a year ago, Jackson County legislators in Kansas City, Missouri, voted to greenlight construction last week on a $301 million detention center project, after months of holdup. The two Kansas City, Missouri-based general contractors on the project, JE Dunn Construction and Axiom Construction Group, expect to complete construction in the second half of 2025, according to a project presentation shown to the Jackson County Legislature.

The project price tag, originally pegged at about $257 million, soared to over $300 million amid rising building costs, according to the presentation.

That led to a construction pause due to questions around the project’s guaranteed maximum price. Given the 17% price tag increase, Jackson County legislators were wary to move forward with the project, largely due to concerns around financing.

Nevertheless, Jackson County legislators finally agreed earlier this month to borrow up to $262 million for the project, with the rest of the costs to come from both county revenue and proceeds from interest earned on the borrowed money, according to the Kansas City Star.

The unanimous vote allows JE Dunn and Axiom to lock in the cost of building materials and begin site work for the facility, avoiding concerns of further price hikes. Components of the approved ordinance include detailing, site demolition, site development, earthwork, engineering and early procurement of long lead materials, said Jeff Jenkins, project director at JE Dunn, in a document sent to the county legislature

That permits the project to move forward with early earthwork and some site infrastructure items to allow the building pad to become ready for additional scopes of work, according to the document.

Construction input prices ticked up a slight 0.2% in April and remain nearly 40% higher since the start of the COVID-19 pandemic, according to an Associated Builders and Contractors analysis of government data released last week.

For example, prices for concrete products, one of the main materials used in the detention center project, jumped 13.2% in April since last year, and are up 30% since February 2020. Meanwhile, even though iron and steel prices ticked down 14.3% since last year, those commodities still sit 66.3% pricier since February 2020.

The $301 million jail project will total approximately 400,000 square feet, hold about 1,000 beds and support additional capacity expansion if needed, according to the project fact sheet. The facility sits on county-owned land near the U.S. 40 Highway in Kansas City.

Leave a comment