The war in Ukraine, global port congestion, and the persistent spread of COVID variants will conspire to raise prices on equipment and key building products by 7-9 percent this year, according to the general contractor Consigli’s latest market update, which it released a few days ago.
Authors Peter Capone and Jared Lachapelle, Consigli’s director of construction and vice president of preconstruction, respectively, wrote that while the nonresidential construction industry continues to be resilient, it can’t completely alleviate forces that are reducing or delaying the supply of raw materials and finished goods.
Russia’s invasion of Ukraine has reduced the supply of manufacturing materials such as aluminum and copper, and is putting a strain on production and delivery across Europe. Meanwhile shipping congestion “is showing little sign of improvement” worldwide, especially at ports in Asia.
Other factors contributing to rising construction prices include spikes in fuel costs, and wage increases that are jacking up labor costs. “Acquiring workforce, [in] the Northeast in particular, remains an area of concern,” the authors state. Union and non-union subcontractors “are booking up to capacity for 2022,” and are already focused on next year and beyond.
Electrical equipment and hardware, and roofing materials, are stalled in long lead times. As a result, price inflation for these products is expected to be double digit this year.
Consigli is also keeping an eye on a few things that could affect prices, such as contract negotiations with the International Longshoreman Warehouse Union that are scheduled for this July and will impact 22,000 workers at 79 ports.
The federal infrastructure bill, as it rolls out, will place more stress on an already tight labor market. Consigli notes that half of its larger subcontractors have secured 85 percent of their backlog for this year, and are “quickly filling” their projected backlog for 2023.
Related Stories
Market Data | Nov 15, 2017
Architecture Billings bounce back
Business conditions remain uneven across regions.
Market Data | Nov 14, 2017
U.S. construction starts had three consecutive quarters of positive growth in 2017
ConstructConnect’s quarterly report shows the most significant annual growth in the civil engineering and residential sectors.
Market Data | Nov 3, 2017
New construction starts in 2018 to increase 3% to $765 billion: Dodge report
Dodge Outlook Report predicts deceleration but still growth, reflecting a mixed pattern by project type.
Market Data | Nov 2, 2017
Construction spending up in September; Down on a YOY basis
Nonresidential construction spending is down 2.9% on a year-over-year basis.
Market Data | Oct 19, 2017
Architecture Billings Index backslides slightly
Business conditions easing in the West.
Industry Research | Oct 3, 2017
Nonresidential construction spending stabilizes in August
Spending on nonresidential construction services is still down on a YOY basis.
Market Data | Sep 21, 2017
Architecture Billings Index continues growth streak
Design services remain in high demand across all regions and in all major sectors.
Market Data | Sep 21, 2017
How brand research delivers competitive advantage
Brand research is a process that firms can use to measure their reputation and visibility in the marketplace.
Contractors | Sep 19, 2017
Commercial Construction Index finds high optimism in U.S. commercial construction industry
Hurricane recovery efforts expected to heighten concerns about labor scarcities in the south, where two-thirds of contractors already face worker shortages.
Multifamily Housing | Sep 15, 2017
Hurricane Harvey damaged fewer apartments in greater Houston than estimated
As of Sept. 14, 166 properties reported damage to 8,956 units, about 1.4% of the total supply of apartments, according to ApartmentData.com.