Construction cost barrier for new centers

Many new community leisure venues (CLVs), including family entertainment centers (FECs), are developed based on financial feasibility studies that use existing centers as comparable projects. However, although the existing centers may be financially successful, replicating the center might not make a new center financially viable. Why? Because the existing center was built several years ago at yesterday's cost. In contrast, the new center will be built at today's, more likely tomorrow's cost, considering the time it takes to get a new center financed and open.

There was a sharp rise in nonresidential construction costs between April 2021 and January 2023. Since then, construction costs have slightly declined, but they are still 36% higher than in February 2020, right before the beginning of the pandemic.

Following is a breakdown of the change from February 2020 for different construction inputs. Except for natural gas, the price of everything is up.

Implications for LBEs

The increased cost of construction poses serious financial feasibility challenges for new location-based projects (LBEs), including family entertainment centers (FECs). Construction costs have risen at a far greater rate than the prices LBEs can charge. In addition, high loan interest rates for loans further complicates the financial viability for most new LBE projects.

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