U.S. construction costs increased 1.7% year over year in October, according RSMeans’ 30-City index. At the same time, the October quarter to quarter change was 1.1% annualized. Material costs moved up 0.5% year over year and 0.6% quarter to quarter annualized. The installation sub-component (i.e., labor) was +3.1% year over year and +1.4% quarter to quarter annualized.
The last time a significant uptick occurred in U.S. construction costs was in mid-2008. July 2008 was when the world price of oil rose to a record high and many other commodities were also at or near their price peaks. The only other period to match 2008 was four years earlier in 2004.
In the recession, most commodity prices fell back, but only so far. Emerging nations have maintained a good pace of growth and often a level of capital spending on infrastructure that has provided many commodity prices with a floor. Now, commodity prices are acquiring new legs.
Weakness in construction activity levels in the U.S. since the onset of the recent recession has also helped to keep material costs down. Housing starts have been depressed for many years and with respect to non-residential projects, private sector financing went into hiding. This will gradually change over the next year as investment money returns to facilities construction.
As for workers’ wages, union agreements have served to save labor rates from falling too low.
New York remains America’s most expensive city in which to build. San Francisco, Oakland, Honolulu and Boston round out the Top Five. Chicago, Philadelphia and Minneapolis are other major cities where it is relatively expensive to put up a structure. It is least expensive to build in southern cities such as Charlotte, Austin, San Antonio, Houston, Memphis and Jacksonville.
Cities in the Northeast and Midwest have experienced the sharpest year-over-year gains in construction costs, led by Hartford and Stamford, Conn. with Columbus, Baltimore, Pittsburgh and Chicago next. While most of the year-over-year increases in construction costs have been relatively modest (+3.5% was the maximum), only Salt Lake City (-0.1%) recorded a decline.
The most recent quarter-to-quarter construction cost changes (annualized) indicate accelerating increases. Stamford (+10.6%) and Hartford (+6.3%) are the most prominent on this list.
Major material cost increases have come in: concrete reinforcing (+6.4% year over year; -2.2% quarter to quarter annualized); metal joists and decking (+5.2% year over year; +4.3% quarter to quarter annualized); glazing and curtain walls (+2.7% year over year; +8.2% quarter to quarter annualized); and tile and terrazzo (+1.6% year over year; +6.6% quarter to quarter annualized).
Declines have been recorded in: precast concrete (-5.7% year over year; -1.2% quarter to quarter annualized); roofing and siding (-4.2% year over year; -1.1% quarter to quarter annualized); and ceilings and acoustic treatment (-7.7% year over year; -1.6% quarter to quarter annualized).
Means also monitors 20 cities in Canada. In the latest reading, Edmonton tops the list as most expensive in which to build, followed by Calgary, Toronto, Vancouver and Hamilton. Cheapest Canadian centers for construction costs are St. John’s, N.L., Halifax, Saskatoon, Regina and Windsor, Ont.
While Saskatoon and Regina may be inexpensive on a nominal basis, costs there have been rising faster than in the rest of the country. Vancouver, St. John’s and Laval, Que. have also seen more rapid gains in construction costs over the last year or so than in other major centers. Ottawa, Hamilton, London, Ont., Windsor and St. Catharines, Ont. have recorded the slowest rates of increase.
|Highest to Lowest Cost
30-city national average)
% Change (ANNUALIZED)
|Rank||Oct 2010||Rank||Oct 10 vs Oct 09||Rank||Oct 10 vs July 09|
|13||Los Angeles||107.3%||13||Sacramento||2.2%||13||San Antonio||1.9%|
|16||Seattle||104.9%||16||Kansas City||1.9%||16||St. Louis||1.7%|
|19||Milwaukee||103.4%||19||St. Louis||1.8%||19||Los Angeles||1.6%|
|32||Indianapolis||92.9%||32||San Francisco||1.3%||32||Salt Lake City||0.8%|
|39||Atlanta||88.0%||39||Ft. Lauderdale||0.9%||39||San Diego||0.4%|
|40||Salt Lake City||87.2%||40||Detroit||0.9%||40||Houston||0.3%|
|48||Memphis||84.8%||48||Las Vegas||0.4%||48||San Francisco||-0.4%|
|51||Charlotte||76.6%||51||Salt Lake City||-0.1%||51||Dallas||-0.8%|
|Materials sub-component of CCI –
|Installation/Labor Sub-component of CCI – latest movements|
|30-city average hourly labor rates for skilled workers
(20 trades) (including fringe benefits)