BNi Building News Construction Costs 2022
Posted: March 18, 2022 | Cost Trends
Residential construction is strong but waning. Commercial is making a solid comeback and infrastructure is finally on the way up. While residential is steadily losing jobs (but not at a great rate), commercial and heavy construction added 24,000 in December alone, after a strong third and fourth quarter in 2021.
The recovery of the non-residential segment may finally be upon us in a sustained way. Overall, the industry is up 6 to 7% and moving in the right direction. Labor costs continue at just a 1.5% increase, but watch out this year because full employment and increased demand should fuel substantial wage gains.
Materials continue their rise with steel and lumber leading the way. The overall increase is in the 25% range with steel leading the pack at 40%. Other items such as concrete are far more stable but could turn without much notice. The result is that the general conditions of construction contracts are including more and more escalator clauses. One important thing to consider is that material is statistically 50% of the cost of building in place, so it would be wise to budget accordingly. Anything dependent on the price of oil has risen in price and will be volatile until geopolitical tensions abate.
Right now asphalt is up 15% for the last twelve months. Six months ago it was up 6% and six months before that down 6%. Looking at the graph we see that it is on a virtual roller coaster. Economists were seeing crude oil becoming weaker for the rest of this year, but now with geopolitical uncertainty, it’s anyone's guess. Asphalt will follow the price of oil.
Last report, gypsum was up a whopping 24%. While still up considerably at 10 percent, we feel that the dramatic surge is starting to moderate.
Brick is still up 6.3% over the last year. Historically, brick was somewhat stable, with average increases of 1 to 1.5%; but in the last 12 months, brick is up more than four times the average increases of the previous 10 years.
Steel was down 1.5% just twelve months ago. Now steel has posted gains of 33% year over year. Prices are at record highs, demand is surging and steel makers have consolidated in the past year, allowing them to exert more control over supply
Lumber had been on a wild ride with gains of over 80%. It has since leveled off, dropped 25% and staged a mild comeback, but remains 15% below last year. One note: lumber is still exceedingly high and may remain there for the near future. This is still one to watch and pretty hard to predict.