Rising construction material cost is an unavoidable part of the construction industry, especially in summer. With more temperate weather and longer daylight hours comes an increase in demand for both materials and labour, driving up the price for both. The construction industry is facing an increase in construction costs year after year, making profit margins slimmer than ever. Construction material costs are facing a year-round pricing increase, rising nearly 5% during the 2018 calendar year. Also, tariffs and rising fuel prices are helping drive costs upwards, and a shortage of skilled workers results in higher rates charged for their labour.
In the spring of 2020 as COVID-19 began to impact the world economy, nearly every industry felt the effects. Construction was no exception. Projects were postponed, placed on hold, or cancelled. Construction unemployment started to skyrocket, leaving many wondering how the industry might be affected both short and long term. perfect for tying these spaces into one another, enabling you to still achieve an open feel, while creating designated spaces to get the whole family from morning to evening.
One of the challenges of accurately estimating construction costs is the fact that there are so many variables that can impact the final budget, including the frequently-shifting prices for labour and materials. While the price to rent construction equipment may stay relatively stable, the cost for labour and materials can vary from project to project, and even day to day.
What impacts Construction Pricing?
Supply and Demand: Like most goods and services, construction pricing is highly sensitive to the forces of supply and demand. When demand is high, construction pricing increases. When demand decreases, however, contractors are willing to pursue riskier projects at reduced pricing to keep their businesses moving forward.
Backlog: Backlog is the amount of construction work currently on the books. When the economy is strong, backlog creates a buffer. This buffer causes a lag in how quickly construction is impacted by and reacts to current economic conditions.
Labour Costs: Construction is labour intensive. It is difficult to run wire, hang pipe, or lay block without skilled labour. Because of this, a large portion of construction costs are determined by labour expenses. Wages increase as the cost of living goes up and construction costs follow. This explains why the cost of construction is higher in New York, Northern California, and other regions with a higher cost of living.
Commodity Pricing: Commodity pricing plays a role in determining construction costs as well. When oil prices go down, so do petroleum-based products such as insulation, asphalt, and roofing materials. When steel prices increase due to new tariffs, the cost of joists, metal panels, and pipe increases accordingly.
Local Market Disruption: Rapidly growing markets often have a shortage of contractors and skilled construction labour. This creates high demand for construction resources that then inflates local pricing and can significantly increase the cost of a project compared to national averages.
