Rich Hilgendorff is chief estimator at Wise Construction, a Winchester-based construction management firm specializing in health care, biotechnology, education and corporate clients.

With 2008 well under way, there is a sense of unease within the construction and real estate industries with regard to rising construction costs. Costs have always been a key factor in the success or failure of any real estate project. At a time of economic uncertainty and with fears of recession, people start to pay closer attention to construction costs and its variables. Sometimes their concerns are grounded and at other times reality becomes exaggerated. Let’s clear up the ambiguity and take a closer look at reality versus perception in the marketplace today.

First the facts: From Dec. 2003 through Feb. 2008, the price of materials used in all types of construction as well as items consumed by contractors, such as diesel fuel, soared 31 percent, according to Associated General Contractors of America. Obviously, those soaring prices are impacting all types of construction projects across the country. But this is not the first time that the cost of construction materials has risen. In the past, our industry has fielded similar challenges with great success and has always come roaring back.

So what should the construction industry do? Stay calm and keep an eye out for alternative solutions. Weigh your options and see how you can develop more efficient, cost-effective results for your clients and your current project. Most importantly, figure out how you can run your construction projects efficiently in order to eliminate costly pitfalls, improve your scheduling and cut certain labor costs. It is undeniable that the pricing of both materials and labor has gone up in recent years, a direct reflection of a hot and cold economy.

The price of construction materials has especially skyrocketed, with raw materials such as copper, gypsum and steel up anywhere from 20 percent to 40 percent. With the rising demand for energy, especially overseas, we’ve also witnessed a tightening of the energy supply, resulting in increased costs. Yet this ebb and flow should by no means limit the industry’s ability to find creative solutions when starting new projects.

Over the past five years, construction demands from industry sectors such as health care, retail, office and residential have varied, depending on the overall health of the economy. The sectors most adversely affected during this time period has been both the residential (multifamily in particular), as well as the corporate sec-tors. For example, long-term lease deals with corporate offices margins are thin today, and thus any sway in the economy will affect the volume of deals within the corporate sector. This realty has a direct affect on the number of construction projects being started, as well as a drop off in the size of projects.

Despite all this uncertainty, however, some market sectors have remained strong and will continue to grow. For example, the health care and institutional markets are almost recession proof and historically remain in demand. Both sectors remain an asset to the construction community, not only because of this historical demand, but also because of their emphasis on staying current with trends in technology. At the moment, many organizations from these sectors are implementing sustainable practices and green designs, the result being an increase in demand for construction jobs. Although initial upfront costs are greater, green design generates long-term savings for owners given its emphasis on sustainable design and efficiency. Green construction has become one of the many ways owners have begun to combat costs in recent years.

In order to offset construction costs, owners are beginning to back off of certain types of projects, and are beginning to make do with their space, oftentimes taking the space as it is. The construction industry is also witnessing an all-round decrease in renovation work and contractors are beginning to rely more on the reuse of materials, as opposed to the ample gut renovation work of past years. Owners have also begun to combat costs by employing contractors, architects and construction managers as early in the process as pre-construction, effectively creating a three-way approach to generate long-term savings. By getting all parties involved as early as possible, an owner’s project will have a greater chance of remaining on schedule and on budget. In line with trends in green design, many energy companies now offer energy-saving rebate pro-grams, in which owners outfit their space with energy-efficient materials (e.g. light fixtures). These offerings are advantageous for owners in the long haul, as they provide an efficient solution for an owner’s long-term energy requirements.

General contractors, construction managers and architects together are also learning to offset costs this year in a number of ways. As mentioned earlier, architects and contractors have begun to focus on trends such as green design, which is increasing in demand. Contractors and architects are also further developing work in niche markets, focusing on their specialties.

This year has presented a wealth of challenges and opportunities for the construction industry. The tightening of the market and rising construction costs has left the industry in a position that places great emphasis on the innovative approach to upcoming projects, while new trends and technologies, coupled with booming niche markets, allow the industry to further develop specialty services and refine its means and methods.