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
Multifamily Housing | Aug 17, 2022
California strip mall goes multifamily residential
Tiny Tim Plaza started out as a gas station and a dozen or so stores. Now it’s a thriving mixed-use community, minus the gas station.
| Aug 17, 2022
Focusing on building envelope design and commissioning
Building envelope design is constantly evolving as new products and assemblies are developed.
| Aug 17, 2022
New York to deploy 30,000 window-sized electric heat pumps in city-owned apartments
New York officials recently announced the state and the city will invest $70 million to roll out 30,000 window-sized electric heat pumps in city-owned apartments.
| Aug 17, 2022
IBM’s former office buildings in Boca Raton turn into a modern tech campus
Built in 1968, the Boca Raton Innovation Campus (BRiC), at 1.7 million square feet, is the largest office campus in Florida.
| Aug 16, 2022
DOE funds 18 projects developing tech to enable buildings to store carbon
The Department of Energy announced $39 million in awards for 18 projects that are developing technologies to transform buildings into net carbon storage structures.
| Aug 16, 2022
Multifamily holds strong – for now
All leading indicators show that the multifamily sector is shrugging off rising interest rates, inflationary pressures and other economic challenges, and will continue to be a torrid market for design and construction firms for at least the rest of 2022.
| Aug 16, 2022
Cedars-Sinai Urgent Care Clinic’s high design for urgent care
The new Cedars-Sinai Los Feliz Urgent Care Clinic in Los Angeles plays against type, offering a stylized design to what are typically mundane, utilitarian buildings.
| Aug 15, 2022
IF you build it, will they come? The problem of staff respite in healthcare facilities
Architects and designers have long argued for the value of respite spaces in healthcare facilities.
| Aug 15, 2022
Boston high-rise will be largest Passive House office building in the world
Winthrop Center, a new 691-foot tall, mixed-use tower in Boston was recently honored with the Passive House Trailblazer award.
| Aug 12, 2022
Monthly Construction Input Prices Decreased 2% in July, Up 17% From a Year Ago, Says ABC
Construction input prices decreased 1.8% in July compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today.