Construction Costs Continue to Rise in 2020
Date Posted: April 10, 2020
Posted In: News, Projects,
From Commercial Property Executive: The COVID-19 outbreak has impacted the construction industry with a tsunami of uncertainties. Municipalities are shutting down non-essential construction sites temporarily in response to the pandemic while simultaneously preparing to order construction of new medical facilities. One thing is certain, however, construction costs will rise again in 2020.
WHAT DOES IT COST TO BUILD A COMMERCIAL BUILDING?
Fundamentally, cost increases are expected to accelerate as public policy demands are directed at the existing projects underway and new healthcare facilities come online. The art of construction cost estimating is always a balance of subcontractor and general developer experiences balanced with current material considerations. Gordian provides an extensive construction cost database through their RSMeans data products. RSMeans data (see below) allows for the estimation of hard costs based on location, for material and labor costs.
WHY ARE CONSTRUCTION COSTS SO HIGH?
In 2019, construction costs rose nationally by 2 percent, and they are predicted to continue to rise this year, said Tim Duggan, vice president of Data and Analytics for Gordian. These increases have been driven by a shortage of labor and increasing prices for materials. Which factor is most responsible for higher construction costs?
“I would say that at this point they are probably equivalent,” said Duggan. “Both are competing as drivers. Tariffs have a very quick but short-term drive up on costs which then settle back down, while wages seem to be a continuing issue for driving up the cost.”