According to CBRE's new 2022 U.S. Construction Cost Trends report, nationwide industry price levels have posted the largest increase in years, driven by labor shortages, inflation, supply chain disruptions, the ongoing impact of the pandemic, and the war in Ukraine.
CBRE forecasts a 14.1 percent year-over-year increase in construction costs by the end of the year, an increase from last year’s 11.5 percent gain. This 2022 figure is the largest increase since CBRE began tracking cost projections in 2007, exceeding the average rise of 2 percent to 4 percent per year. Following 2022, CBRE predicts cost increases to decline back to their historical range at 4.3 percent next year and 2.9 percent in 2024 as supply chain issues, inflation, and material production difficulties ease.
“The construction industry thrives on predictability, but we continue to grapple this year with numerous challenges and volatility, making estimating and managing costs more difficult,” said Nicolas McNamara, Director of Cost Consultancy for CBRE. “Labor shortages and wage pressure — combined with supply chain disruption — have contributed to a sharp increase in costs. But demand for new projects remains strong.”
Tension from both the demand and supply sides this year is responsible for the rise in construction costs. Demand is high for residential housing, infrastructure projects, and logistics facilities, such as warehouses, while material costs have risen due to constrained production during the pandemic. Global shipping costs have also increased, and the war in Ukraine has further strained supplies of materials. In addition, labor shortages continue to drive costs, as the AEC industry has yet to reach its pre-pandemic level.
3 Comments
can we stop with the Ukraine propaganda. A war limited to that specific country has nothing to do with global material supply chains. Buying materials from Canada, Mexico, China and elsewhere have no connection to the Ukraine. and Russia is not blockading global shipping from entering US ports.
I once had a contractor tell me he couldn't get the ceiling tile for our project because of the 9/11 attacks.
It’s all bs to pass the blame away from the Biden admins absolute incompetence.
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