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 | Oct 19, 2023
Crane Index indicates slowing private-sector construction
Private-sector construction in major North American cities is slowing, according to the latest RLB Crane Index. The number of tower cranes in use declined 10% since the first quarter of 2023. The index, compiled by consulting firm Rider Levett Bucknall (RLB), found that only two of 14 cities—Boston and Toronto—saw increased crane counts.
Market Data | Oct 2, 2023
Nonresidential construction spending rises 0.4% in August 2023, led by manufacturing and public works sectors
National nonresidential construction spending increased 0.4% in August, 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 $1.09 trillion.
Giants 400 | Sep 28, 2023
Top 100 University Building Construction Firms for 2023
Turner Construction, Whiting-Turner Contracting Co., STO Building Group, Suffolk Construction, and Skanska USA top BD+C's ranking of the nation's largest university sector contractors and construction management firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking includes revenue for all university/college-related buildings except student residence halls, sports/recreation facilities, laboratories, S+T-related buildings, parking facilities, and performing arts centers (revenue for those buildings are reported in their respective Giants 400 ranking).
Construction Costs | Sep 28, 2023
U.S. construction market moves toward building material price stabilization
The newly released Quarterly Construction Cost Insights Report for Q3 2023 from Gordian reveals material costs remain high compared to prior years, but there is a move towards price stabilization for building and construction materials after years of significant fluctuations. In this report, top industry experts from Gordian, as well as from Gilbane, McCarthy Building Companies, and DPR Construction weigh in on the overall trends seen for construction material costs, and offer innovative solutions to navigate this terrain.
Data Centers | Sep 21, 2023
North American data center construction rises 25% to record high in first half of 2023, driven by growth of artificial intelligence
CBRE’s latest North American Data Center Trends Report found there is 2,287.6 megawatts (MW) of data center supply currently under construction in primary markets, reaching a new all-time high with more than 70% already preleased.
Contractors | Sep 12, 2023
The average U.S. contractor has 9.2 months worth of construction work in the pipeline, as of August 2023
Associated Builders and Contractors' Construction Backlog Indicator declined to 9.2 months in August, down 0.1 month, according to an ABC member survey conducted from Aug. 21 to Sept. 6. The reading is 0.5 months above the August 2022 level.
Contractors | Sep 11, 2023
Construction industry skills shortage is contributing to project delays
Relatively few candidates looking for work in the construction industry have the necessary skills to do the job well, according to a survey of construction industry managers by the Associated General Contractors of America (AGC) and Autodesk.
Market Data | Sep 6, 2023
Far slower construction activity forecast in JLL’s Midyear update
The good news is that market data indicate total construction costs are leveling off.
Giants 400 | Sep 5, 2023
Top 80 Construction Management Firms for 2023
Alfa Tech, CBRE Group, Skyline Construction, Hill International, and JLL top the rankings of the nation's largest construction management (as agent) and program/project management firms for nonresidential buildings and multifamily housing work, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Sep 5, 2023
Top 150 Contractors for 2023
Turner Construction, STO Building Group, DPR Construction, Whiting-Turner Contracting Co., and Clark Group head the ranking of the nation's largest general contractors, CM at risk firms, and design-builders for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2023 Giants 400 Report.
