The rising price of building materials and a shortage of skilled laborers is expected to drive up construction costs in the Greater Houston area in 2015, according to area builders and developers. The cost increase has had notable effects on the development of major projects in the Greater Houston area, including Sugar Land and Fort Bend ISD. Officials with the city of Sugar Land and FBISD both said construction costs are closely monitored and taken into account when new infrastructure projects and buildings are being planned. Local projects Chris Steubing, Sugar Land city engineer, said a recent surge of construction in the Greater Houston area has resulted in a less competitive market, causing a declining interest from contractors for local projects. "Just drive around Houston and you will see tower cranes everywhere and high-rise buildings," Steubing said. "That is an image that sticks in your mind when you start seeing construction prices creep up." The Houston market has experienced a boom of development with 25 percent of all national commercial development split between Houston and New York City, he said. As the medical community, residential sector and road development continues to expand, it has forced local contractors to be more diversified when it comes to their services. "We are much more diversified now in the types of projects that are ongoing," Steubing said. "They are not all related to the energy market or gas and oil. Contractors are much more diverse in what they are doing." This boom has paired Sugar Land up against major projects, such as the construction of the Grand Parkway and Phase 2 of the Fort Bend Parkway, which has created an increased demand for contractors and subcontractors. As a result of this demand, local projects are receiving fewer bids at an increased cost. Although the city maintains lines of communication with local contractors and developers, Steubing said determining interest and projecting the amount of bidders on each project has become a guessing game. "There is no rhyme or reason to it," he said. "You throw a dart at the wall and you hit a number, and you have just as much luck guessing as you do hitting the right number with the dart." Most recently, Sugar Land City Council moved forward with Phase 2 of the $12.37 million Brazos River Park recreational development and an adjacent festival site as a part of the $31.5 million parks bond, which was approved by voters in 2013. Only two contractors—Harper Brothers Construction and Millis Construction—made bids on the project, both of which came in above the city's $10.15 million budget. Harper Brothers filed the lowest bid at $12.37 million while Millis Construction filed its bid at $13.55 million. To move forward with construction, City Council awarded the projects to Harper Brothers and voted to reallocate $3.4 million of Proposition 2 funds, intended for use in 2016, to account for the $2.22 million increase. Voters approved Proposition 2, worth $21.3 million, as part of the city's parks bond package in November 2013, and it outlines Phase 2 of the Brazos River Park project and the festival site. Doug Adolph, assistant director of communications for Sugar Land, said the city accounted for inflated construction costs when determining the total cost of Proposition 2. City Council's decision to reallocate funds slated for 2016 to 2015 helps maintain project timelines and keeps them in line with what voters approved, Adolph said. FBISD officials said additional construction costs have resulted in district projects coming in higher when compared to projects from five years ago. Between 2007 and 2014, construction costs for schools rose from approximately $118 per square foot to $200 per square foot, according to the Texas Comptroller's office. With four new additional schools planned alongside elementary schools No. 46 and No. 47 and Middle School No. 15, FBISD Chief Financial Officer Steve Bassett said the district accounted for the rise in construction costs in the $484 million bond initiative that was passed in 2014. Despite the increase in construction costs, FBISD Chief Operations Officer Max Cleaver said FBISD projects have not been delayed as the district looks to decrease spending by reducing the need for additional facilities. Cost of materials Turner Construction Company, which has offices around Houston, developed its own cost index to track nonresidential building construction. The company's methodology—which considers labor rates and productivity, material prices and the competitive condition of the marketplace—shows steady increases every quarter since 2011. Overall, costs have risen about 11.7 percent since that time. "Growth in nonresidential construction was steady in the fourth quarter in virtually all domestic markets," Turner Vice President Attilio Rivetti said. "Higher construction cost escalations in urban centers with increased construction activity are driving the average domestic construction cost increases." The rising cost of materials has wide-ranging effects. Steubing said the city's biggest concern is having the ability to deliver projects addressing infrastructure and reconstruction needs without increasing the tax rate. "That is the biggest issue," he said. "You have a city that is growing, aging infrastructure and everything else while being able to deliver the services that are expected by residents." Fewer skilled hands One persistent contributing factor to the rising construction costs is the shortage of skilled workers across various fields. Houston added more construction jobs than any U.S. metro market, according to a report from the American General Contractors of America. The jobs boom means the labor shortage will continue through 2015. The declining unemployment rate has made it more difficult to find qualified workers, officials said. A 2014 survey conducted by the National Association of Home Builders found that about 46 percent of Houston building companies are struggling with the skilled labor shortage. The shortage is also expected to intensify as millions of baby boomers prepare for retirement. Skilled laborers in the construction field include industrial electricians, commercial plumbers, heavy equipment operators and concrete finishers. The shortage has been so widespread in the Houston market that the demand for projects is starting to outweigh the supply of labor, Steubing said. "I do not think it is there yet because we are still able to get bids on certain things, but I think labor is starting to be one of the biggest issues," he said.