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Construction Cost Report Highlights Decisions

Tuesday, July 13, 2021

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A new quarterly National Construction Cost Index report from construction consultancy firm Rider Levett Bucknall shows that the NCCI was up 4.6%. in the first quarter of 2021 compared to that same period last year.

The report overall sheds a positive light on the industry despite the ongoing concerns of material costs, supply chain issues and skilled employment lags, according to the firm’s Julian Anderson, President, North America.

The Report

In addition to the NCCI, the report also highlights several other metrics, including the Architectural Billings Index, which from April 2020 to April 2021, has gone up from 30.2 to 57.9. The Midwest and the South regions are reportedly seeing the greatest uptick reporting 60.6 and 58.3, respectively, with the Northeast coming in at 55.0 and the West at 52.4.

4kodiak / Getty Images

A new quarterly National Construction Cost Index report from construction consultancy firm Rider Levett Bucknall shows that the NCCI was up 4.6%. in the first quarter of 2021 compared to that same period last year.

The report also tracked the Dodge Data & Analytics Momentum Index (DMI), which is a monthly measure of the first report for non-residential building projects in planning.  As the DMI increased, the NCCI also increased, indicating that demand continues to drive cost increases as the industry deals with supply struggles.

This quarter, the NCCI increased from 211.9 to 218.06 (2.9%), which is the largest increase in a quarter in the last 20 years, according to Bucknall.

In addition to the numbers, though Anderson points out that there are other factors impacting the industry such as climbing interest rates on top of the construction cost hikes that offer a challenge for budgeting, another is the prioritization of clean energy from the current administration.

“Among the most critical of choices facing general contractors and construction managers will be to identify which building sectors to target while operating in this altered business environment. It’s a decidedly what’s hot, what’s not scenario,” Anderson said, pointing to a few numbers. In Q1 2021:

  • Industrial warehouses showed a 12% increase in size year-over-year;
  • retail malls shrank by 11%;
  • The square footage of Class A apartment developments grew 6%; and
  • Hotel/hospitality projects contracted 9%.

“Collectively, these conditions prompt a question worth contemplating as we move into the future: Are we in a recovery or a transition? The former implies a return to a previous state of affairs, a resumption of a past status quo, while the latter points to a wholesale shift, a permanent transformation,” Anderson said.

In terms of metro areas, Boston, Chicago, New York, Phoenix, Portland, and Washington, D.C. all experienced percentage increases in construction costs above the 4.35% quarterly national average during Q1 2021 versus the same quarter a year ago.

Previous Reports

Bucknall released a report in February that detailed the shift in cities’ construction over the COVID-19 pandemic, from October 2019 to October 2020. The company’s comparative cost index looked at the bid cost of construction including labor, materials and overhead costs and fees, as well as applicable sales and use taxes.

That report cited the U.S. Department of Commerce, noting that in October 2020, construction put in place was estimated at a seasonally adjusted annual rate of $1.44 billion, which is 1.3% higher than the month before, and 3.7% higher than the same month in 2019.

Bucknall honed in on 12 U.S. cities, finding increased comparative costs in all but one: Chicago’s construction costs went down by 1.29%. The other cities’ numbers included increases of:

  • Boston – 3.31%;
  • Denver – 1.83%;
  • Honolulu – 1.04%;
  • Las Vegas – 1.78%;
  • Los Angeles – 4.41%;
  • New York – 3.67%;
  • Phoenix – 1.43%;
  • Portland – 1.62%;
  • San Francisco – 3.82%;
  • Seattle – 2.39%; and
  • Washington, D.C. – .53%.

The report also broke down costs per square foot in eight categories in each city, including offices, retail shopping, hotels, hospital, industrial, parking, residential and education.

In correlation with employment and contract data for the year, residential construction costs saw some of the biggest year over year growth while industrial margins remained minimal. For example, the increases for single-family construction costs per square foot of gross floor area include:

  • Boston – from $260 to $360;
  • Chicago – from $220 to $420;
  • Denver – from $115 to $450;
  • Honolulu – from $295 to $785;
  • Las Vegas – from $100 to $350;
  • Los Angeles – from $205 to $365;
  • New York – from $300 to $600;
  • Phoenix – from $120 to $450;
  • Portland – from $155 to $325;
  • San Francisco – from $325 to $475;
  • Seattle – from $180 to $325; and
  • Washington – from $260 to $380.

   

Tagged categories: Construction; COVID-19; Economy; Good Technical Practice; Government; Market; Market data; NA; North America; Spending

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