Housing continues its slide, joined by declines in both office and hospitality construction. However, this is offset by just about everything else to lodge a healthy 12 percent increase in overall construction spending. Much of this increase is due to elevated material costs, but the net effect is still a 2 to 3 percent actual gain. Inflation remains high but has begun to level off — still something to watch. The labor shortage is holding back the commercial rise, with no solution on the horizon. Nevertheless, it’s still a good time to feel positive about the future for commercial construction.
CONSTRUCTION MATERIALS
Material prices are leveling off. The moves by the Fed seem to be working. Oil has stabilized and the price of fuel has decreased considerably. Some materials are more readily available and the supply chains, although fragile, are working. The overall increase in material prices remains high but has dropped to single digits. Some items are stable, some down, and a few are still wild. Looking at the charts below, it clearly seems that we may (hopefully) be on the downside of runaway material prices, but remember that we still have a lot to make up.
SAND & GRAVEL
For the past ten years sand and gravel moved steadily upward. We saw a softening in 2020 and a dramatic upturn in the fall of 2021. Then because of the price of fuel, sand and gravel took off early this year but has waned, now registering gains of just 5 percent year over year. Much better than the 20 percent we were looking at just twelve months ago.
PRECAST CONCRETE
Precast had been on a fairly steady rise for the last several years and had shown itself to be a stable component with average increases of 4-5 percent since 2016. But in 2021 it started registering gains of 12 percent, and now it’s up to a high of 16 percent for the year.
PLUMBING FIXTURES
The cost of plumbing fixtures was on a tear but has now subsided. This component seems to have caught up to the rest of the market. The Covid pandemic created a boom in home improvements and that may have fueled the rise. Plumbing fixtures are now flat for the year.
CONCRETE
Same story, six months later. After average increases of 3 to 4 percent over 5 years, concrete flattened, then rallied and has since sustained the rally. The increases have been in the 8 percent range, not as dramatic as the rest of the pack but still significant.
CONCRETE BLOCK
Concrete block seemed to be leveling off last year but then went on to an increase of 7 percent. Since then, it has risen to increases of 10 to 15 percent, depending on the type and size of block. It has now softened to increases of 8 percent.
