flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

Encouraging construction cost trends are emerging

Market Data

Encouraging construction cost trends are emerging

In its latest quarterly report, Rider Levett Bucknall states that contractors’ most critical choice will be selecting which building sectors to target.


By John Caulfield, Senior Editor | July 8, 2021
Rider Levett Bucknall's Construction Cost Index rose again in the first quarter of 2021
Rider Levett Bucknall's Construction Cost Index rose again in the first quarter of 2021

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

 

Several metros exceeded the national average for percentage growth in construction costs

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 | Oct 31, 2016

Nonresidential fixed investment expands again during solid third quarter

The acceleration in real GDP growth was driven by a combination of factors, including an upturn in exports, a smaller decrease in state and local government spending and an upturn in federal government spending, says ABC Chief Economist Anirban Basu.

Market Data | Oct 28, 2016

U.S. construction solid and stable in Q3 of 2016; Presidential election seen as influence on industry for 2017

Rider Levett Bucknall’s Third Quarter 2016 USA Construction Cost Report puts the complete spectrum of construction sectors and markets in perspective as it assesses the current state of the industry.

Industry Research | Oct 25, 2016

New HOK/CoreNet Global report explores impact of coworking on corporate real rstate

“Although coworking space makes up less than one percent of the world’s office space, it represents an important workforce trend and highlights the strong desire of today’s employees to have workplace choices, community and flexibility,” says Kay Sargent, Director of WorkPlace at HOK.

Market Data | Oct 24, 2016

New construction starts in 2017 to increase 5% to $713 billion

Dodge Outlook Report predicts moderate growth for most project types – single family housing, commercial and institutional building, and public works, while multifamily housing levels off and electric utilities/gas plants decline.

High-rise Construction | Oct 21, 2016

The world’s 100 tallest buildings: Which architects have designed the most?

Two firms stand well above the others when it comes to the number of tall buildings they have designed.

Market Data | Oct 19, 2016

Architecture Billings Index slips consecutive months for first time since 2012

“This recent backslide should act as a warning signal,” said AIA Chief Economist, Kermit Baker.

Market Data | Oct 11, 2016

Building design revenue topped $28 billion in 2015

Growing profitability at architecture firms has led to reinvestment and expansion

Market Data | Oct 4, 2016

Nonresidential spending slips in August

Public sector spending is declining faster than the private sector.

Industry Research | Oct 3, 2016

Structure Tone survey shows cost is still a major barrier to building green

Climate change, resilience and wellness are also growing concerns.

Industry Research | Sep 27, 2016

Sterling Risk Sentiment Index indicates risk exposure perception remains stable in construction industry

Nearly half (45%) of those polled say election year uncertainty has a negative effect on risk perception in the construction market.

boombox1
boombox2
native1

More In Category




halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021