In the first six months of 2022, quarter-to-quarter inflation for construction materials showed signs of easing, but only slightly. “It’s important to clarify that costs are not decreasing; a more accurate description is that [they are] getting expensive less quickly,” stated Dallas-based architecture and construction firm The Beck Group, in its Summer 2022 Biannual Cost Report, which Beck released this week.
Covering January through June of this year, the report combines market data from a variety of sources—including AIA, FMI, McKinsey & Company, Autodesk, Cumming, the Urban Land Institute, and Associated General Contractors of America—with insights from the firm’s preconstruction teams in six markets: Atlanta, Austin, Charlotte, Dallas-Fort Worth, Denver, and the state of Florida.
Market conditions remain challenging nearly everywhere. “Schedule-related constraints are a new norm in today’s market,” The Beck Group contends. “Construction firms are in the middle of suppliers who can’t or won’t commit to pricing longer than 10 days and owners with historically prolonged approval processes. This reality conflicts with the past when it was still possible to hold pricing for upwards of 60 days.”
That being said, The Beck Group claims that the industry is on the cusp of a “new era in collaboration to manage costs and schedules.” That is especially true for developers and owners that bring their AEC partners into projects as early as possible. In its report, The Beck Group offers a list of strategies for managing inflation and supply-chain disruptions that mostly revolve around earlier procurement (see box).
Beck itself creates procurement packages for its clients to secure materials and equipment, a service that involves the firm’s design and construction teams.
DENVER AN EXPENSIVE PLACE TO BUILD IN
On the whole, The Beck Group is seeing significant demand and construction activities in the Sun Belt, in line with the “constant migration” of people and businesses to that region. (It points out, for example, that 43 high-rise towers are under development or construction in Austin.) To keep up with that demand, subcontractors in Texas must rely on imported cement (which, ironically, is among the construction materials least affected by current inflation).
The report takes a deeper dive into the six Sun Belt markets mentioned above, and breaks down project costs by building types—office, healthcare, higher education, faith-based, hospitality, parking, and site work—and their respective sub niches.
The Denver metro is experiencing high demand for multifamily and mixed-use projects. Existing and planned projects are plentiful in the Atlanta market, and subcontractors report substantial backlogs. Building activity in the Florida market remains healthy, bolstered by the state’s economy that is expected to expand by 4 percent between now and 2024. The most significant demand for construction is education, healthcare, and aviation.
Across all building types, it costs more to build or renovate in Denver than in the other five markets, albeit only marginally so in several cases. For example, in healthcare, Denver’s costs per sf for ambulatory surgery centers—ranging from $477 to $583—were around $10 to $25 higher than the other metros. Science and lab buildings cost from $650 to $901 per sf to construct in Denver, versus $631 to $885 in Austin, another S+T hotbed.
The report also compares the cost per key to build or renovate hotels in these six markets, as well as the cost per space for parking and the cost per acre for site development.
CONSTRUCTION EMPLOYMENT STRENGTHENING
The Beck Group report corroborates what other recent studies have been finding: that the construction employment market, nationally, is improving. Beck predicts this trend to continue as higher wages lure more people into the profession. The employment situation might also explain the slight bump in industry confidence that was evident in the first half of the year.
Related Stories
Contractors | Feb 14, 2023
The average U.S. contractor has nine months worth of construction work in the pipeline
Associated Builders and Contractors reports today that its Construction Backlog Indicator declined 0.2 months to 9.0 in January, according to an ABC member survey conducted Jan. 20 to Feb. 3. The reading is 1.0 month higher than in January 2022.
Office Buildings | Feb 9, 2023
Post-Covid Manhattan office market rebound gaining momentum
Office workers in Manhattan continue to return to their workplaces in sufficient numbers for many of their employers to maintain or expand their footprint in the city, according to a survey of more than 140 major Manhattan office employers conducted in January by The Partnership for New York City.
Giants 400 | Feb 9, 2023
New Giants 400 download: Get the complete at-a-glance 2022 Giants 400 rankings in Excel
See how your architecture, engineering, or construction firm stacks up against the nation's AEC Giants. For more than 45 years, the editors of Building Design+Construction have surveyed the largest AEC firms in the U.S./Canada to create the annual Giants 400 report. This year, a record 519 firms participated in the Giants 400 report. The final report includes 137 rankings across 25 building sectors and specialty categories.
Multifamily Housing | Feb 7, 2023
Multifamily housing rents flat in January, developers remain optimistic
Multifamily rents were flat in January 2023 as a strong jobs report indicated that fears of a significant economic recession may be overblown. U.S. asking rents averaged $1,701, unchanged from the prior month, according to the latest Yardi Matrix National Multifamily Report.
Market Data | Feb 6, 2023
Nonresidential construction spending dips 0.5% in December 2022
National nonresidential construction spending decreased by 0.5% in December, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $943.5 billion for the month.
Architects | Jan 23, 2023
PSMJ report: The fed’s wrecking ball is hitting the private construction sector
Inflation may be starting to show some signs of cooling, but the Fed isn’t backing down anytime soon and the impact is becoming more noticeable in the architecture, engineering, and construction (A/E/C) space. The overall A/E/C outlook continues a downward trend and this is driven largely by the freefall happening in key private-sector markets.
Hotel Facilities | Jan 23, 2023
U.S. hotel construction pipeline up 14% to close out 2022
At the end of 2022’s fourth quarter, the U.S. construction pipeline was up 14% by projects and 12% by rooms year-over-year, according to Lodging Econometrics.
Products and Materials | Jan 18, 2023
Is inflation easing? Construction input prices drop 2.7% in December 2022
Softwood lumber and steel mill products saw the biggest decline among building construction materials, according to the latest U.S. Bureau of Labor Statistics’ Producer Price Index.
Market Data | Jan 10, 2023
Construction backlogs at highest level since Q2 2019, says ABC
Associated Builders and Contractors reports today that its Construction Backlog Indicator remained unchanged at 9.2 months in December 2022, according to an ABC member survey conducted Dec. 20, 2022, to Jan. 5, 2023. The reading is one month higher than in December 2021.
Market Data | Jan 6, 2023
Nonresidential construction spending rises in November 2022
Spending on nonresidential construction work in the U.S. was up 0.9% in November versus the previous month, and 11.8% versus the previous year, according to the U.S. Census Bureau.
