Industry News




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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Xcel Energy’s Data Center Efficiency program can help data centers and large-scale IT operations improve reliability and energy efficiency.


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.


 
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