From July through October of 2020, national construction costs rose, on average, by 0.25%, based on 14 markets in North America tracked by the construction consulting firm Rider Levett Bucknall (RLB), which has just released its North America Construction Cost report for the fourth quarter of 2020.
Over the first 10 months of last year, construction spending rose by 3.7% to $1.439 trillion, according to Census Bureau estimates. Construction costs were up by 2.03%. RLB’s National Construction Cost Index stood at 209.82 for the fourth quarter of last year, compared to 205.62 for the same period a year earlier. After rising consistently since the fourth quarter of 2015, RLB’s Index tapered off last year.
The full report can be downloaded from here.
Given the impact of construction activity from the coronavirus pandemic, “the economic damage incurred over the past nine months will take time to heal,” writes Julian Anderson, FRICS, President-North America for RLB.
Anderson expresses concern about lingering unemployment that is “casting a darker shadow over the economy.” He speaks optimistically about President-Elect Joe Biden’s expansive infrastructure plan, whose passage became more likely now that Democrats will control the executive and legislative branches following the election of two Democratic senators in Georgia earlier this month.
For the most part, inflation is under control in the construction sectors of U.S. metros.
Anderson predicts that Biden’s plan will receive bipartisan support “if it is tied to creating jobs that have been lost due to the pandemic.” The New York Times, quoting Bureau of Labor Statistics estimates, reported on January 9 that 9.4 million jobs were lost in the U.S. in 2020, the worst year since World War II.
Construction unemployment, which spiked in the second quarter when the coronavirus delayed or postponed projects, has recovered of late. The industry gained 51,00 jobs in December, even though the total for the year was down 142,000, or 1.9%. However, a survey that included 1,329 responses, conducted by Associated General Contractors of America (AGC) in every state from Nov. 11 through Dec. 11, found that contractors are generally pessimistic about the outlook for nonresidential and multifamily construction in 2021.
SAN FRANCISCO STILL COSTLIEST MARKET
RLB’s report breaks down its Cost Index by cities and building types. For example, San Francisco, New York, and Boston registered the highest indices for prime office construction. Chicago, Honolulu, and San Francisco had the highest cost indices for five-star hotels. Los Angeles is the most expensive market in which to build hospitals, in part because of California’s seismic mitigation requirements.
This chart shows the relative costs of materials and labor as bid in markets around the U.S., and the average percentage change from October 2019 to October 2020.
San Francisco and Los Angeles had the highest indices for the Industrial sector, Sn Francisco and Seattle for multifamily costs, and Honolulu and New York for costs attendant to building high schools.
All told, Chicago, Boston, New York, Portland, and San Francisco all experienced cost increases that were higher than the national average in the latest quarter, even though Chicago’s Cost Index was lower, by 1.29%, for the year. Conversely, Los Angeles experienced the highest October 2019-October 2020 increase in its Cost Index, 4.41%, despite a slight decline in the latest quarter. And for the year, San Francisco had the highest “as bid” index measuring a representative sampling of materials and labor among the markets tracked.
Denver, Seattle, and Washington D.C. saw quarterly increases that were below the national average for construction costs.
Related Stories
Market Data | Jun 11, 2021
The countries with the most green buildings
As the country that set up the LEED initiative, the US is a natural leader in constructing green buildings.
Market Data | Jun 7, 2021
Construction employment slips by 20,000 in May
Seasonally adjusted construction employment in May totaled 7,423,000.
Market Data | Jun 2, 2021
Construction employment in April lags pre-covid February 2020 level in 107 metro areas
Houston-The Woodlands-Sugar Land and Odessa, Texas have worst 14-month construction job losses.
Market Data | Jun 1, 2021
Nonresidential construction spending decreases 0.5% in April
Spending was down on a monthly basis in nine of 16 nonresidential subcategories.
Market Data | Jun 1, 2021
Nonresidential construction outlays drop in April to two-year low
Public and private work declines amid supply-chain woes, soaring costs.
Market Data | May 24, 2021
Construction employment in April remains below pre-pandemic peak in 36 states and D.C.
Texas and Louisiana have worst job losses since February 2020, while Utah and Idaho are the top gainers.
Market Data | May 19, 2021
Design activity strongly increases
Demand signals construction is recovering.
Multifamily Housing | May 18, 2021
Multifamily housing sector sees near record proposal activity in early 2021
The multifamily sector led all housing submarkets, and was third among all 58 submarkets tracked by PSMJ in the first quarter of 2021.
Market Data | May 18, 2021
Grumman|Butkus Associates publishes 2020 edition of Hospital Benchmarking Survey
The report examines electricity, fossil fuel, water/sewer, and carbon footprint.
Market Data | May 13, 2021
Proliferating materials price increases and supply chain disruptions squeeze contractors and threaten to undermine economic recovery
Producer price index data for April shows wide variety of materials with double-digit price increases.