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Study: Construction Costs Climb in US Metros

Thursday, May 9, 2019

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According to Phoenix-based international property and construction consultancy firm Rider Levett Bucknall, construction costs have risen an average 5.7% nation-wide.

In its First Quarter 2019 North American Quarterly Construction Cost Report, research looked at 15 building typologies and 14 metros. The sectors also analyzed single- and multifamily housing, as well as parking garages.

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According to Phoenix-based international property and construction consultancy firm Rider Levett Bucknall, construction costs have risen an average 5.7% nation-wide.

Within RLB’s report, those experiencing the biggest cost increases in U.S. metros included: Chicago (7.6%); Portland, Oregon (7.1%); San Francisco (6.7%); Phoenix (6.7%); Washington, D.C. (6.5%); Seattle (6.4%), Las Vegas (5.4%); Honolulu (4.8%); New York (4.5%); Boston (4.4%); Los Angeles (4.4%); and Denver (4%).

The report also suggests that, while most markets have reached or were approaching their peak in construction activity, Chicago was the only city considered to be in a mid-decline. Regardless of the city’s largest annual increase in construction costs, Chicago’s price tag to build was higher than other reported markets, depending on the asset.

The collection of information reveals a reverse scenario for San Francisco, however. A few months ago, San Francisco was reported to be the most expensive place to build by a 2019 International Construction Market Survey, conducted by U.K.-based sot consultant company Turner& Townsend.

RLB has indicated that since the cost increases include labor, materials, taxes, overhead and profit, during a construction boom, the overall cost increases faster than labor or materials, since the overhead and profit must be increased in response to a high demand.

Additional findings from RLB’s report include the cost estimates for building hospitals is highest in Los Angeles and building elementary schools is lowest in Las Vegas. Boston and New York are the most expensive cities to build prime office spaces but the same activity is most affordable in Phoenix and Denver.

The trends suggest that construction costs are on the rise. The U.S. Census Bureau estimated that in January 2019, the seasonally adjusted annual rate for Construction Put-in-Place was $1.28 trillion, a 0.3% increase from the $1.27 trillion estimate concluded last year.

The National Construction Cost Index has also been on a steady rise since the first quarter of 2014. To put that rise into context, the U.S. Gross Domestic Product closed 2018 at 2.6%, down 4.2% from the mid-year peak, but up 3.2% for the first quarter of 2019.

Despite the slight decline in growth for architecture firms reported in the Architectural Billings Index, the increase in expensive construction continued to take place. Some states have even reported higher bid rejections and cancellations of projects all together, due to the price increase.

Data within the RLB report is current to Jan.1, and embodies construction cost information collected from 12 American and two Canadian markets.

   

Tagged categories: Annual report; Construction; Maintenance + Renovation; Market; Market data; Market forecasts; Market research; Market trends; NA; North America; Projects - Commercial; Research; Research and Markets

Comment from john lienert, (5/9/2019, 7:03 AM)

just trying to keep up with the astronomical rise in food prices (buy a good prime rib lately?)


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