03/18/2008

Tumultuous Year for Construction Projects, Prices, and Labor

There are two factors that make it likely that a 6- to 8-percent growth rate for construction input prices will be sustained

 
Nonresidential construction will experience wide variance in demand, materials cost, and labor availability, according to the Construction Inflation Alert recently released by the Arlington, VA-based Associated General Contractors of America (AGC).

"In 2008, some nonresidential segments will continue to grow, including power and energy, but others, such as lodging, will slow or decline," says AGC Chief Economist Ken Simonson. "Diesel, copper, and steel are among materials costs likely to accelerate while others remain benign."

The large increase in fuel prices (especially diesel) compared to a year ago, along with the importance of diesel fuel to highway construction, makes it likely that highway costs will go up even more. Conversely, the slumping demand and rising supply of gypsum products may mean nonresidential and multi-unit residential building costs go up a little less than 6 percent.           

Looking beyond 2008, there are two factors that make it likely that a 6- to 8-percent growth rate for construction input prices will be sustained. First, many construction inputs, such as diesel fuel, steel, and copper, are in demand worldwide. Second, construction will always be dependent on physical delivery of heavy, bulky, relatively low-value materials for which transportation and fuel costs are a major part of the delivered price.

Labor accounts for roughly half the cost of a construction project. In 2007, despite the high level of nonresidential activity, contractors were generally able to find enough workers, thanks to a massive redeployment of specialty trade contractors from residential to lighter nonresidential projects.

"In 2008, I expect labor shortages will worsen for a few crafts, pulling average wage rates higher, but in other segments such as residential specialty trades, the supply of some crafts will be plentiful," notes Simonson. "Wage increases in nonresidential construction may rise to the 4.5- to 5.5-percent range in 2008, despite the slowdown in overall activity, and to 5 to 6 percent in 2009, when residential work begins to compete again for some specialties."

For a complete copy of AGC's Construction Inflation Alert, visit (www.agc.org/cia).
 


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Visit our website today to learn about the design flexibility of a Morton building and the endless possibilities of partnering with our designBUILD team.


Wood construction is both cost and energy efficient. Check out Morton Buildings and our designBUILD team online today to discover all the benefits of post-frame construction.


When choosing a metal-clad building for your next construction project, consider Morton Buildings, Inc., and their designBUILD team, we’ll make your dream a reality.

We Can Help You Reduce Energy by 30%

Our mission is to help our customers manage their buildings' energy costs, improve reliability, and enhance performance while having a positive impact on the environment.
CLICK HERE to find out how.

 


Tennant Company is a recognized leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. With thousands of satisfied customers already using award winning ec-H2O technology, why not see what you're missing? Test ec-H2O on your soils in your facility. Get a free demo.


Tennant Company is a recognized leader in designing, manufacturing and marketing solutions that help create a cleaner, safer, healthier world. With thousands of satisfied customers already using award winning ec-H2O technology, why not see what you're missing? Test ec-H2O on your soils in your facility. Get a free demo.

 

Replace core drilling with Connectrac In-Carpet and On-Floor Wireways, the proven connectivity solution in open interior spaces of all kinds. These elegant low-profile wireways are great for AV / telecom connectivity wherever it’s needed.

 

Add highly responsive multi-zone comfort to any building project, in any climate. Our CITY MULTI H2i R2- and Y-Series VRF systems give you flexibility to fit the needs of any building. Enjoy 100% heating capacity at 0°F outdoor ambient, and 85% heating capacity at -13°F outdoor ambient.  For more information, log on to www.mitsubishipro.com


 
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