In the 12 months ended December 2021, bid construction costs rose 7.42 percent. “These increases are reminiscent of the sort of cost increases that we saw in the period 2004 to 2007,” wrote Julian Anderson, FRICS, President-North America for the construction advisory firm Rider Levett Bucknall (RLB), which today released its Fourth Quarter 2021 North America Construction Cost Report.
RLB’s National Construction Cost Index for the fourth quarter stood at 225.38, 7.4 percent higher than the Index for the fourth quarter of 2020, and 1.8 percent higher than last year’s third quarter. In his essay for this report, Anderson was optimistic about the eventual positive impact of the recently passed Bipartisan Infrastructure bill on construction and repair.
However, the force of that legislation could be stymied, or at least delayed, by supply chain problems that continue to plague the industry. Bottlenecks at western ports and chronic shortages of skilled labor still contribute to this volatility. Cost increases are also a function of rising inflation, as the Consumer Price Index registered a year-over-year increase of 5.38 percent.
On the positive side, America’s Gross Domestic Product, which measures output, returned to 2.1 percent, which was about where it was in the pre-pandemic fourth quarter of 2019. And the rate of unemployment for the construction sector dipped to 4.5 percent in Q421, versus 9.6 percent in Q420. Construction tracked national unemployment that has also been on a downward trend.
SEVERAL METROS BUCKED QUARTERLY COST TREND
Nonresidential construction spending in November 2021, the latest month for which data were available from the Census Bureau, stood at $820.6 billion, 3.4 percent higher than the same month in 2021. But materials and labor keep getting more expensive, too. RLB’s Comparative Cost Index found that, from October 2020 through October 2021, construction costs rose by 10.09 percent in Seattle, by 9.11 percent in Washington DC, by 9.01 percent in Chicago, by 8.85 percent in Boston, and by 8.51 percent in New York.
Indexed by building type, construction costs were among the highest in New York for offices, shopping malls, hospitals, single-family homes, and high schools. San Francisco’s construction costs exceeded the other markets RLB tracked for five-star hotels, hospitals, warehouses, parking structures, multifamily homes, high schools, and universities.
Honolulu is the most expensive market in which to build elementary schools. But that market, along with Denver, Las Vegas, Los Angeles, Phoenix, Portland, and Washington DC, experienced overall cost increases between July 1 and October 1 that were less than the national average for that period, according to RLB estimates.
Related Stories
Market Data | Jan 13, 2021
Atlanta, Dallas seen as most favorable U.S. markets for commercial development in 2021, CBRE analysis finds
U.S. construction activity is expected to bounce back in 2021, after a slowdown in 2020 due to challenges brought by COVID-19.
Market Data | Jan 13, 2021
Nonres construction could be in for a long recovery period
Rider Levett Bucknall’s latest cost report singles out unemployment and infrastructure spending as barometers.
Market Data | Jan 13, 2021
Contractor optimism improves as ABC’s Construction Backlog inches up in December
ABC’s Construction Confidence Index readings for sales, profit margins, and staffing levels increased in December.
Market Data | Jan 11, 2021
Turner Construction Company launches SourceBlue Brand
SourceBlue draws upon 20 years of supply chain management experience in the construction industry.
Market Data | Jan 8, 2021
Construction sector adds 51,000 jobs in December
Gains are likely temporary as new industry survey finds widespread pessimism for 2021.
Market Data | Jan 7, 2021
Few construction firms will add workers in 2021 as industry struggles with declining demand, growing number of project delays and cancellations
New industry outlook finds most contractors expect demand for many categories of construction to decline.
Market Data | Jan 5, 2021
Barely one-third of metros add construction jobs in latest 12 months
Dwindling list of project starts forces contractors to lay off workers.
Market Data | Jan 4, 2021
Nonresidential construction spending shrinks further in November
Many commercial projects languish, even while homebuilding soars.
Market Data | Dec 29, 2020
Multifamily transactions drop sharply in 2020, according to special report from Yardi Matrix
Sales completions at end of Q3 were down over 41 percent from the same period a year ago.
Market Data | Dec 28, 2020
New coronavirus recovery measure will provide some needed relief for contractors coping with project cancellations, falling demand
Measure’s modest amount of funding for infrastructure projects and clarification that PPP loans may not be taxed will help offset some of the challenges facing the construction industry.