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 | 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.
Hotel Facilities | Sep 6, 2017
Marriott has the largest construction pipeline of any franchise company in the U.S.
Marriott has the most rooms currently under construction with 482 Projects/67,434 Rooms.
Market Data | Sep 5, 2017
Nonresidential construction declines again, public and private sector down in July
Weakness in spending was widespread.
Market Data | Aug 29, 2017
Hidden opportunities emerge from construction industry challenges
JLL’s latest construction report shows stability ahead with tech and innovation leading the way.
Market Data | Aug 28, 2017
U.S. hotel construction pipeline is up 7% year-over-year
For the economy, the rate of growth may be low but it’s running on all cylinders.
Market Data | Aug 23, 2017
Architecture Billings Index growth moderates
“The July figures show the continuation of healthy trends in the construction sector of our economy,” said AIA Chief Economist, Kermit Baker.
Architects | Aug 21, 2017
AIA: Architectural salaries exceed gains in the broader economy
AIA’s latest compensation report finds average compensation for staff positions up 2.8% from early 2015.