After six months of discussions, building contractors and unions have reached an agreement to slice labor costs. The problem is that developers estimate the deal will only save them no more than 15%—far less than the 25% they had sought when negotiations began.
Developers had hoped lower labor costs would help bring down a project’s total price tag, making financing easier to achieve amid the credit crunch and recession. Labor accounts for 45% to 60% of a project’s costs. But there are doubts about whether the negotiated cuts go deep enough to make a difference in getting new or stalled projects off the ground.
The contractors and unions are expected to present a deal that they say will lower costs between 15% and 20%. Developers, however, estimate the savings will only total between 8% and 15%.