R.S. Means: Stable materials prices expected

August 11, 2010

Construction prices overall are expected to escalate at a very modest 2.5 percent in 2001. Still, there are pockets of stronger price increases to consider for selected materials in virtually all areas. Also, installation costs will remain stable, growing only slightly.

These are the underlying fundamentals of construction project pricing as we head into 2001. Local market activity and resulting supply and demand factors will determine how pricing of actual construction put in place behaves. Cost trends are generally providing a stable platform for estimating projects. Contractors and owners must continue to account for competitive conditions, unique labor requirements and overall trends for a region.

Building material suppliers anticipate a stable market for at least the first two quarters of 2001. Concrete and concrete-related materials suppliers indicate that the increased cost of cement and some aggregates are reflected in the 2 percent to 3 percent increase in ready-mix concrete. Code changes related to energy efficiency and new construction technology have contributed to a 4 percent increase in architectural glass products, including tube framing and glazing. Specialty items such as demountable and bathroom partitions and bathroom accessories increased by more than 15 percent.

Mechanical system prices increased by 10 percent, primarily because of an increase in the cost of manufacturing and the cost of raw materials. These increases are in keeping with recent trends in the industry and are not unexpected.

Construction labor rates vary by trade and by location. For 2001, the 35 trade skilled-worker average labor rates are increasing by 3.8 percent. Open shop wages are moving up accordingly, with the trend continuing to narrow the overall spread between wage rates. Mainly because of the availability of new equipment and greater efficiency, crew equipment costs have remained stable.

Material prices have remained fairly stable from 2000 to 2001. By CSI Division, material prices increased on average 2 percent, with the exception of Division 10, Specialties and Division 15, Mechanical. However, key material prices in both of these divisions showed greater increases.

In anticipation of the growing economy and the effect it would have on the construction industry, manufacturers and suppliers began investing in upgrading and expansion of facilities in the late 1990s. Even with this aggressive approach, 1999 was termed a crisis year in the industry. In some cases, manufacturers could not keep up with product demand, as witnessed in the sharp increases in drywall and panel prices. During 2000, the cost of wood and composite-wood building materials and interior finish-specifically drywall-stabilized as manufacturers caught up with demand. Currently, drywall suppliers indicate that prices are at a cycle average.

Lumber prices at the mill declined over most of 2000, showing minor gains in the fourth quarter. Lower mill prices do not equate to lower prices in the market, as experts report that it is unrealistic to expect even a drop of nearly one-third in framing lumber prices to show up in the prices of new construction.

         
 

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