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 | Oct 26, 2021
U.S. construction pipeline experiences highs and lows in the third quarter
Renovation and conversion pipeline activity remains steady at the end of Q3 ‘21, with conversion projects hitting a cyclical peak, and ending the quarter at 752 projects/79,024 rooms.
Market Data | Oct 19, 2021
Demand for design services continues to increase
The Architecture Billings Index (ABI) score for September was 56.6.
Market Data | Oct 14, 2021
Climate-related risk could be a major headwind for real estate investment
A new trends report from PwC and ULI picks Nashville as the top metro for CRE prospects.
Market Data | Oct 14, 2021
Prices for construction materials continue to outstrip bid prices over 12 months
Construction officials renew push for immediate removal of tariffs on key construction materials.
Market Data | Oct 11, 2021
No decline in construction costs in sight
Construction cost gains are occurring at a time when nonresidential construction spending was down by 9.5 percent for the 12 months through July 2021.
Market Data | Oct 11, 2021
Nonresidential construction sector posts first job gain since March
Has yet to hit pre-pandemic levels amid supply chain disruptions and delays.
Market Data | Oct 4, 2021
Construction spending stalls between July and August
A decrease in nonresidential projects negates ongoing growth in residential work.
Market Data | Oct 1, 2021
Nonresidential construction spending dips in August
Spending declined on a monthly basis in 10 of the 16 nonresidential subcategories.
Market Data | Sep 29, 2021
One-third of metro areas lost construction jobs between August 2020 and 2021
Lawrence-Methuen Town-Salem, Mass. and San Diego-Carlsbad, Calif. top lists of metros with year-over-year employment increases.
Market Data | Sep 28, 2021
Design-Build projects should continue to take bigger shares of construction spending pie over next five years
FMI’s new study finds collaboration and creativity are major reasons why owners and AEC firms prefer this delivery method.