Is the construction industry in recovery or transition?
That’s the question raised by Rider Levett Bucknall’s North America Quarterly Construction Cost report for the second quarter of 2021.
On the positive side, the major economic indicators showed no signs for concern. Inflation in the first quarter of 2021 rose 1.7% over the previous quarter. The Gross Domestic Project increased by 6.4% in the first quarter of 2021 compared to the same period a year ago. And the index for Architectural Billings, at 55.6 in March, was above the 50 mark for the first time since Q4 2019. (It rose again in April, to 57.9.)
RLB’s Construction Cost Index, at 218.06 for the first quarter of 2021, was 4.6% above the same quarter in 2020. And construction in place in April, as valued by the U.S. Commerce Department, stood at $1.524 trillion, 9.8% higher than in April 2020.
On the glass-half-empty side, the construction industry is still hampered by supply-chain bottlenecks, volatile commodity prices, delayed permitting processes and materials tariffs. The ongoing shortage of qualified labor—construction unemployment, while down in the first quarter, was still 8.6%—is also having an impact on projects’ cost and scheduling, making budgeting and bidding “highly uncertain,” says RLB’s report.
The immediate future isn’t all that clear, either, what with the possibility of climbing interest rates, and the Biden Administration’s prioritizing clean energy and reduced carbon levels in response to climate change, which might also affect construction prices.
SEVERAL METROS EXCEED NATIONAL COST GROWTH AVERAGES
Construction spending was on the rise in all the metros that RLB tracked, several at rates higher than the 4.35% national average for the first quarter.
A closer look at construction costs per square foot found that San Francisco or Honolulu led the pack for hotels, industrial buildings, parking, five-star hotels, residential housing, and elementary education. New York outpaced other cities for new retail, high schools, and universities.
Boston, Chicago, New York, Phoenix, Portland, and Washington, D.C. all experienced percentage increases in construction costs above the 4.35% quarterly national average during Q1 2021 versus the same quarter a year ago. Other locations below the national average included Denver, Honolulu, Los Angeles, San Francisco, and Seattle. Las Vegas experienced the same escalation as the national average.
RLB thinks the most critical choices that GCs and CMs now face is identifying which building sectors to target while operating in a business environment that’s been altered by the coronavirus pandemic. For example, in the first quarter, the industrial sector grew by 12%, year-over-year; conversely hotels and hospitality projects contracted by 9%.
“One of the lessons learned from the past year is the central—and growing—role that technology plays in the AEC industries,” wrote Julian Anderson, FRICS, President of Rider Levett Bucknall North America. “The degree of operational efficiency that connected technologies affords is a true game changer, providing transparency, accuracy, and consistency to all stakeholders while accelerating the design process. From cost estimating to streamlining workflows to digital twins, these tools are transforming the landscape of design and construction.”
Related Stories
Market Data | Jun 30, 2020
AIA releases strategies and illustrations for reducing risk of COVID-19 in senior living communities
Resources were developed as part of AIA’s “Reopening America: Strategies for Safer Buildings” initiative.
Market Data | Jun 30, 2020
329 metro areas added construction jobs in May
Seattle-Bellevue-Everett, Wash. added the most construction jobs (28,600, 44%) in May.
Market Data | Jun 29, 2020
6 must reads for the AEC industry today: June 29, 2020
HQ tower features gardens on every floor and the head of Hilton talks about how his business will survive.
Market Data | Jun 26, 2020
5 must reads for the AEC industry today: June 26, 2020
Restoration of 1930s El Paso hotel completes and Arc offers tools, analytics for safe workplace re-entry.
Market Data | Jun 25, 2020
Commercial Construction Index drops amid Coronavirus pandemic, but contractors poised for near-term recovery
Contractors quickly prioritized worker health and safety, and 1 in 3 plan to hire more workers in the next 6 months.
Market Data | Jun 25, 2020
7 must reads for the AEC industry today: June 25, 2020
CDC to build the most advanced high containment laboratory in the country and architecture billings downward trajectory moderates.
Market Data | Jun 24, 2020
Architecture billings downward trajectory moderates
AIA’s Architecture Billings Index (ABI) score for May was 32.0 compared to 29.5 in April, but still represents a significant decrease in services provided by U.S. architecture firms.
Market Data | Jun 24, 2020
8 must reads for the AEC industry today: June 24, 2020
San Francisco's apartment market goes in reverse and WATG designs a solution for isolating without sacrificing social connectivity.
Market Data | Jun 23, 2020
National survey reveals pandemic's impact on college students' mental health, remote learning, families' income and more
Of 2,500 student respondents, 75% feel more anxious or stressed, 57% said they lost their summer jobs and 90% want to return to campus in the fall.
Market Data | Jun 23, 2020
7 must reads for the AEC industry today: June 23, 2020
Gyms are going bacnkrupt and leaving gaps in shopping centers and how hotels are trying to keep guests and employees safe.